After making adjustments and refinements to the countercyclical macroprudential measures for property mortgage loans in February 2024 and June 2024 respectively, the Hong Kong Monetary Authority (“HKMA”) announced further adjustments to these measures on 16 October 2024 and introduced a one-off special scheme for uncompleted residential properties on 4 December 2024.
The further adjustments to property mortgage loans are as follows:
(i) the maximum loan-to-value (“LTV”) ratio for all residential properties has been set at 70%, regardless of the value of the property and whether it is for self-occupation;
(ii) the maximum LTV ratio for mortgage loans assessed based on the net worth of mortgage applicants has been adjusted from 60% to 70%, which is the same as the maximum LTV ratio for mortgage loans assessed based on the debt servicing ability of mortgage applicants, regardless of whether the property is residential;
(iii) the debt servicing ratio (“DSR”) limit for non-self-use properties has been adjusted from 40% to 50%, which is the same as the DSR limit for self-use properties, regardless of whether the property is residential; and
(iv) the requirement to lower the applicable maximum LTV ratio and DSR limit by 10 percentage points for mortgage applicants who have borrowed or guaranteed other outstanding mortgage(s) at the time of making a mortgage application has been lifted.
After these adjustments, the maximum LTV ratio has been standardised at 70% and the DSR limit has been standardised at 50% for all residential properties and non-residential properties. In addition, authorized institutions (“AIs”) may adjust the cap percentage of their net worth-based lending in their mortgage portfolios based on their own risk assessment without seeking prior consent from the HKMA.
Furthermore, due to a change in property valuation, some stage payment buyers of uncompleted residential properties may find the property valuation at the time of their mortgage applications to be lower than the purchase price, and hence face difficulty in securing extra funds for the down payment. To assist such buyers and continue to ensure the proper risk management of banks’ property mortgage lending businesses, the HKMA introduced a one-off special scheme offering AIs the flexibility to provide mortgage loans with a maximum LTV ratio of 80% and DSR limit of 60% for stage payment buyers of first-hand residential properties if:
(i) the provisional sale and purchase agreement was signed during the period from 1 January 2021 to 31 December 2023;
(ii) the date of the mortgage application was 4 December 2024 or after;
(iii) the property is for self-occupation; and
(iv) the valuation of the property at the time of the mortgage application was lower than the property purchase price.
The HKMA circular announcing the further adjustments can be found here. The HKMA circular introducing the one-off special scheme can be found here and the relevant press release can be found here.
