The Hong Kong Monetary Authority (HKMA) has unveiled a new round of supervisory measures with regard to property mortgages, in a move aimed at strengthening banks’ risk management.
Following up on earlier initiatives announced two years ago, the HKMA announced on Friday three new regulations on mortgage loans.
Firstly, the maximum loan-to-value (LTV) ratio for self-use residential properties with value below HK$7 million will be lowered by 10 percentage points to 60 percent, according to a statement from the city’s de facto central bank.
Next, the maximum debt-servicing ratio (DSR) for borrowers who buy a second residential property for self-use will be lowered to 40 percent from 50 percent, and the stressed-DSR cap will be lowered to 50 percent from 60 percent, said the statement, which was posted on the HKMA website.
Under the third measure, the maximum DSR of mortgage loans for all non-self use properties, including residential properties, commercial and industrial properties and car park spaces, will be lowered to 40 percent from 50 percent, and the stressed-DSR cap will be lowered to 50 percent from 60 percent.
The above three countercyclical measures take immediate effect, HKMA said. However, mortgage applications for properties with provisional sale and purchase agreements signed Friday or earlier will not be affected.
HKMA chief executive Norman Chan said Friday that the new measures are aimed at safeguarding the stability of the banking and financial system, and that they will inevitably affect some of the users and first-time home buyers.
“The HKMA has always strived to achieve a balance between the need to tighten countercyclical measures to protect banking stability and the desire to minimize negative impact on genuine end-users, especially the first-time home buyers when introducing these measures,” he said.
The Centa-City Leading Index, a tracker of Hong Kong’s property prices compiled by Centaline Property Agency Ltd., rose 16 percent to 136 from 117 over the past one year.
“The government will continue to monitor market conditions closely, and I will not hesitate to introduce measures when necessary, in order to maintain the healthy and stable development of the property market and safeguard the stability of our macroeconomic and financial systems,” Financial Secretary John Tsang said in his annual budget speech on Wednesday.
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