Soaring interest rates: Hong Kong’s new mortgage borrowers and highly leveraged buyers are most at risk in the property market
- Hong Kong’s Financial Secretary Paul Chan Mo-po and HKMA chief executive Eddie Yue Wai-man both warned home buyers to be mindful of higher interest rates
- The risks have been exacerbated by the 75-point blow in Hong Kong’s base rate, in lockstep with the US Federal Reserve’s biggest one-time increase in 28 years
Hong Kong’s new mortgage borrowers and buyers who took the plunge with loans at the 2019 peak of the city’s residential property market are most vulnerable to soaring interest rates.
The risks have been exacerbated by the 75-point blow in Hong Kong’s base rate on June 16, in lockstep with the US Federal Reserve’s biggest one-time increase in 28 years. Topping off the higher rates is a bulging pipeline of new flats – estimated at 12,646 in 2022 by JLL – waiting to find buyers.
“Technically, a buyer who borrows 90 per cent of the property’s value as loan will fall into negative equity territory once the home’s value drops by more than 10 per cent,” said Albert Wong, the honorary chairman of AAHorses Mortgage Brokerage Services, who expects home prices to fall by 20 per cent in 2022 and 2023. “The property market has not factored in [the magnitude] of this round of higher interest rates, which means home prices will have room to fall.”
“Those who plan to apply for a 30-year mortgage loan need to carefully assess if they can afford to repay in a higher interest rate environment,” Yue said during a press conference after matching the Fed’s 75-point move.
