HKMA offers special mortgage policies to help those who bought at property market’s peak
One-off scheme increases loan-to-value ratio of mortgage loans to 80 per cent for those who bought unfinished properties from 2021 to 2023
Specifically, the HKMA said it would raise the maximum loan-to-value (LTV) ratio for mortgage loans to 80 per cent of the current value of a property from 70 per cent previously. Banks use LTV ratios to determine the size of down payments and mortgage loans.
If banks had stuck to the 70 per cent ceiling based on current home prices, borrowers’ mortgage loans would not be sufficient to complete their transactions, according to Eric Tso Tak-ming, chief vice-president of mortgage broker mReferral.
The HKMA also said it would raise the maximum debt-servicing ratio (DSR), which refers to the portion of a borrower’s monthly income that is used to repay debt, to 60 per cent from 50 per cent. Tso said this will allow more borrowers to qualify for home loans. He added that about 4,000 homebuyers will benefit from the new scheme this year and next.
According to the Land Registry, there were 38,717 first-hand units sold between 2021 and 2023. Most of them were sold before the projects were completed. As these properties are at the completed stage, homebuyers will need to apply for mortgage loans to complete their transactions. But many will struggle to get the extra money for the down payment due to the sharp fall in home prices, Tso said.
Most projects launched in 2021 have already been completed, meaning this scheme benefits buyers who bought new residential properties in 2022 and 2023, with an estimated transaction volume of nearly 20,000 over those two years. However, the actual number of users may be smaller, as some buyers made full payments while others did not encounter financial difficulties, according to Sammy Po Siu-ming, CEO of Midland Realty’s residential division.
