Date
17 December 2017
Hongkongers face higher household debt levels once interest rates start to rise. Photo: AFP
Hongkongers face higher household debt levels once interest rates start to rise. Photo: AFP

Household leverage ratio may scale new high, HKMA warns

The loan to income ratio of average homeowners in Hong Kong could surge further to 80.8 percent, assuming that mortgage rates go up by 300 basis points, the Hong Kong Economic Journal reported Friday.

The ratio stood at 61.9 percent in the second quarter, a 14-year high, the report said, citing a semi-annual report on currency and financial stability from the Hong Kong Monetary Authority.

The mortgage burden of an average household that has pledged 70 percent of a home worth HK$5 million (US$644,834) for a 20-year loan will see its mortgage expense rise 30.3 percent if the interest rate rises 300 basis points.

The total household debts climbed an annualized 9.3 percent during the first half, compared with a rise of 7.2 percent for the full year in 2013, mainly due to a higher amount of private loans and credit card overdrafts, the HKMA said.

The de facto central bank expects the property market to remain imbalanced for an extended period of time.

Meanwhile, market sentiment may deteriorate as the United States starts to normalize its interest rates, spurring capital outflows and hastening the downward movement of property prices here.

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