The composite interest rate, which reflects the average cost of funds of banks, increased from 3% at the end of March to 3.1% at the end of April, according to the Hong Kong Monetary Authority. Click here for the trend of interest rates.

The rate hike followed a rise of 6 basis points in the composite interest rate in March.

A 10 basis point increase in the composite interest rate in April reflected upward interest rate adjustments for customers' time deposits and interbank funds.

Despite the moderate increase caused by upward adjustments in time deposit rates and interbank rates in April, the increase in the composite interest rate by 22 basis points in the first four months of 2006 was slightly less than the 25 basis point rise of the best lending rates in the same period, the authority added.

During the first quarter of this year, one bank raised its best lending rate by 50 basis points, while most banks increased their best lending rates by only 25 basis points. There was no adjustment in the best lending rates in April.