Survey on residential mortgage loans in negative equity March quarter

The Hong Kong Monetary Authority announced today the results of the latest survey on residential mortgage loans (RMLs) in negative equity conducted with a number of banks active in mortgage financing.

From the information obtained from the survey, it is estimated that the total number of RMLs in negative equity in the banking sector was about 67,500 or 14% of total mortgage borrowers at end-March, with an aggregate value of about HK$115 billion, or 21% of total outstanding RMLs. These compared with 73,000 cases valued at HK$125 billion at end-December 2001. The decline in number of RMLs in negative equity in the first quarter is due to a number of factors: the stabilisation of property prices, continued instalment repayments by homeowners, pay-downs by customers who sought refinancing or restructuring of their loans and some disposals of repossessed properties.

The survey indicated that 58% of negative equity homeowners were now being charged at below the best lending rate (BLR), compared to 56% at end-December. The average interest rate being charged to negative equity homeowners reduced by another 3 basis points to 0.60% below BLR from that in the December survey.

In addition to the 2,500 RMLs in negative equity that were refinanced or restructured by the banks in the fourth quarter of 2001, another 2,300 were estimated to have been restructured or refinanced in the first quarter of 2002. About 60% of the loans restructured had interest rates reduced.

The average loan-to-value ratio of the aggregate portfolio of RMLs in negative equity remained unchanged at around 125% at end-March.

The figures derived from the survey relate only to RMLs provided by the banks on the basis of first mortgages and which the banks know to be in negative equity. Not included in these figures are some 63,700 RMLs associated with government-funded co-financing schemes and another 21,900 RMLs associated with private sector co-financing schemes. The extent to which such RMLs are in negative equity, taking into account the second mortgage, is not known because banks do not maintain records on the outstanding balances of the second mortgages.

For further enquiries, please contact:

Thomas Chan, Senior Manager (Press), at 2878 1480 or
Sylvia Yip, Manager (Press), at 2878 1687

Hong Kong Monetary Authority
3 June 2002

Annex

Interest rate breakdown of residential mortgage loans in negative equity

BLR = Best lending rate