Netizens have slammed Norman Chan, chief executive of the Hong Kong Monetary Authority (HKMA), for suggesting that most first-home buyers can afford a HK$6 million (US$774,001) apartment under a government assistance program.
For many years, the city government has been encouraging young people to buy smaller and cheaper apartments as their first homes. Although there’s no clear criteria for such apartments, the commonly accepted maximum value was HK$2 million about five years ago and HK$4 million in recent years.
As part of the promotion, the government launched a Mortgage Insurance Program (MIP) in 1999, enabling participating banks to offer loans equivalent to up to 90 percent of the cost of a flat worth less than HK$4 million for qualified borrowers without incurring additional credit risk.
Appearing before the Legislative Council, Chan said the program’s ceiling was HK$6 million.
Normally, banks have to comply with a 70 percent loan-to-value regulatory guideline on residential mortgage lending.
For a HK$6 million apartment, the buyer would have to pay about HK$21,000 every month if 70 percent of the cost is borrowed on a 20-year 3 percent interest mortgage, according to a rough estimate in a report by newspaper Am730 on Wednesday.
A borrower will need to earn more than HK$40,000 monthly to get such a mortgage contract, unnamed bankers were quoted as saying. However, only about 223,000 people, or 3 percent of the city’s population, have monthly income of HK$50,000 or higher as of March, government data showed.
A spokesperson for the HKMA later said Chan’s remarks about a HK$6 million threshold was just a slip of the tongue and the government policy remains unchanged, local netizens believed Chan was implying the threshold for the MIP will be raised to HK$6 million in the near future.
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