H-Plan vs P-Plan:
Still Paying 4%? Switch to P-Plan at 3.25%

First: What Are the P Values at Each Bank Right Now?

The old "Big P" and "Small P" are historical concepts. Actual P values as of June 2026:

Source: 28Hse mortgage comparison (May–June 2026 updates).

How H-Plan and P-Plan Work

H-Plan: Linked to HIBOR

H-Plan rate = 1-month HIBOR + fixed spread. As of June 2026, all five major banks use H + 1.30%. With 1-month HIBOR at 2.60%–2.96%, actual H-Plan rates are 3.90%–4.26%. H-Plan has a cap mechanism — but it hasn't been triggered. The current ~4% rate is simply HIBOR (2.60%–2.96%) plus the 1.30% spread.

P-Plan: Linked to Prime Rate

P-Plan rate = Bank's P value − fixed deduction. Under the Linked Exchange Rate System, HK rates follow the Fed. The Fed's rate cuts from late 2024 to mid-2026 have driven HSBC/Hang Seng/BOCHK's P from 6.125% down to 5.00% — a cumulative 1.125pp cut, directly lowering P-Plan rates.

June 2026: H-Plan vs P-Plan Full Comparison

Why Is This Happening? — The Monetary Policy Transmission Chain

P-Plan being cheaper than H-Plan isn't about bank competition — it's about different transmission speeds within the same monetary cycle:

Chain 1: Fed Cuts → P Falls → P-Plan Rate Falls

Fed cuts → USD rates fall → under the peg, HKMA follows by adjusting Base Rate → interbank funding costs fall → banks cut P under competitive pressure → P-Plan rate falls. This is a fast, clean transmission chain. HSBC/Hang Seng/BOCHK P has already dropped from 6.125% to 5.00%.

Chain 2: Rate Cuts → HIBOR Falls — But Much More Slowly

HIBOR reflects actual supply and demand for funds in the banking system, not the policy rate itself. During the 2022–2024 aggressive hiking cycle, massive capital flowed out of Hong Kong. The Aggregate Balance shrank dramatically. Even though the Fed has started cutting, Hong Kong's funding pool hasn't fully recovered. 1-month HIBOR remains at 2.60%–2.96% — far above the 0.5%–1.0% of the 2016–2021 low-rate era. Core mechanism: P is set by banks under competitive pressure and moves quickly with policy rates; HIBOR is set purely by market supply and demand and lags behind.

Real Holding-Period Interest Comparison: HK$8M Loan

HSBC (P-Plan 3.25% vs H-Plan 4.00%)

BOCHK (Largest Spread: P 3.25% vs H 4.26%)

Bottom line: Even with the most conservative 3-year holding assumption, switching to P-Plan saves HK$178k–240k in interest. At 5 years: HK$294k–396k.

How Long Will This Last?

Judging whether P-Plan's advantage is short-term (6–12 months) or medium-term (2–3 years) depends on three variables:

1. Fed cutting pace: Market expects 2–3 more cuts (0.50–0.75pp total) in H2 2026. Each cut, HK banks typically follow within 1–2 months. If P falls from 5.00% to 4.50% or lower, P-Plan rate drops to 2.75%.
2. When will HIBOR fall: History shows a 12–18 month lag from the first Fed cut to significant HIBOR decline. HIBOR may fall to 1.5%–2.0% by late 2026 to early 2027, at which point H-Plan (H+1.30%) drops to 2.80%–3.30%.
3. Will banks adjust formula spreads: Banks may narrow P-Plan deductions or H-Plan spreads to protect net interest margins. History shows formula adjustments are much slower than P adjustments, but borrowers should be aware these parameters aren't permanently fixed.

Overall judgement: P-Plan's advantage is likely a medium-term phenomenon (12–24 months), not a fleeting window. Until HIBOR significantly declines (projected late 2026 to mid-2027), P-Plan will maintain its rate advantage.

2026 Practical Strategy

New Mortgages: Choose P-Plan Now, Stay Alert for Refinancing Later

With P-Plan rates (3.25%–3.50%) universally below H-Plan (3.90%–4.26%), choosing P-Plan is rational. Monitor the rate environment — when HIBOR falls below 1.50%, reassess H-Plan's attractiveness.

Existing H-Plan Borrowers: Calculate the Net Benefit of Refinancing

On an HK$8M loan, refinancing from H-Plan to P-Plan reduces monthly payment by ~HK$3,400–4,600. After legal fees (~HK$8k–12k), payback period is just 2–4 months. But check if your lock-in period (typically 2 years) has ended — early refinancing triggers penalties of 1%–3% of the loan amount.

Conclusion

In June 2026, P-Plan rates are universally below H-Plan — not because of a "structural shift" in the mortgage market, but because in the Fed's rate-cutting cycle, P (transmitted via policy rate) falls faster than HIBOR (determined by market supply and demand). This is a normal phase lag in the rate transmission mechanism.

On real 3–10 year holding periods, choosing P-Plan saves HK$180k–770k in interest. This phenomenon is expected to persist 12–24 months. Borrowers should adopt a flexible strategy: choose P-Plan now to lock in lower rates, monitor HIBOR closely, and refinance decisively when the rate environment shifts. Core principle: rate advantage has never permanently belonged to either side — it's simply the trace left by the monetary cycle at different points in time.