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Speeches

Statement by Norman T.L. Chan, Chief Executive of the Hong Kong Monetary Authority to the media on 10 June 2011

  1. Since the introduction of a series of measures by the SAR Government and the HKMA in November last year, the property market has been volatile. Although the property market cooled down a bit in March and April this year, there are now signs of renewed exuberance following high transaction prices recorded in recent government land sale auctions. Not just the current property prices have exceeded their peak levels in 1997, interest rate risk is also much higher than that in 1997. The mortgage rates then were usually over 10% while the present mortgage rates are only around 1%. The present unusually low interest rate environment will not last forever.
  2. In view of the increasing risk on mortgage lending, the HKMA has just issued new guidelines to banks, requiring them to implement the following measures to further strengthen risk management in their mortgage business for the purpose of protecting banking stability:
(I) The 50% maximum loan-to-value (LTV) ratio for residential mortgages will apply to residential properties with a value of HK$10 million or above.
(II) The maximum LTV ratio for residential properties with value between HK$7 million and HK$10 million will be lowered to 60%, with the maximum loan amount capped at HK$5 million.
(III) The maximum LTV ratio for residential properties with a value below HK$7 million will be 70%, with the maximum loan amount capped at HK$4.2 million.
(IV) If the principal income of the mortgage loan applicant is not derived from Hong Kong, the applicable maximum LTV ratio will be lowered by at least 10 percentage points regardless of property types or values.
(V) The maximum LTV ratio for properties under the net worth-based mortgage will be lowered from 50% to 40%.
  1. The above measures take effect immediately. However, loan applications in respect of property transactions with provisional sale and purchase agreements signed on or before today will not be affected. Details of these measures will be explained by our Deputy Chief Executive Mr Arthur Yuen later.
  2. The Hong Kong Mortgage Corporation Limited (HKMC) will also revise its Mortgage Insurance Programme, the details of which will be announced by the HKMC later.
  3. The HKMA has all along required banks to be prudent and vigilant in managing credit risk. As the boom cycle in the property market continues to evolve, the risks associated with banks' mortgage lending business increase correspondingly. There is therefore a continuing need for banks to enhance their risk management for their mortgage lending business. This is the fourth time the HKMA introduced countercyclical supervisory measures since October 2009. We will continue to monitor market situation closely and introduce appropriate measures as and when necessary to safeguard banking stability.
Last revision date: 1 August 2011
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