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Residential mortgage loans in negative equity June quarter

The Hong Kong Monetary Authority announced today the results of the latest survey on residential mortgage loans (RMLs) in negative equity1. The mortgage portfolio of the surveyed authorized institutions represents about 98% of the industry total. The results below have been extrapolated to approximate the position of the banking sector as a whole.

The number of RMLs in negative equity increased to about 106,000 with a value of HK$165 billion at end-June 2003. The unsecured portion of these loans is estimated at about HK$36 billion. At end-March 2003, the number and amount of negative equity RMLs had been about 83,000 and HK$135 billion respectively, with an unsecured portion of HK$29 billion.

The amount of delinquent negative equity RMLs grew at a slower pace than the growth in total negative equity RMLs. As a result, the three-month delinquency ratio of negative equity RMLs2 improved further to 2.28% at end-June from 2.56% at end-March.

Many of the new negative equity RMLs are only marginally in negative equity. This, coupled with a reduction in outstanding balances due to repayments, meant that the overall loan-to-value ratio on negative equity RMLs remained stable at 128%.

The average interest rate charged on negative equity RMLs fell to 1.07% below the best lending rate (BLR) at end-June compared with 0.88% below BLR at end-March. In all, about 62% of negative equity homeowners are paying an interest rate below BLR compared with 52% a year ago. This reflects the impact of the refinancing and restructuring of loans in negative equity as well as the lower interest rates already carried by the loans that have recently moved into negative equity.

"The sharp rise in the number and amount of mortgage loans in negative equity in the second quarter is not surprising since it reflects the downward shift in property prices which was aggravated by the SARS outbreak," said Mr David Carse, Deputy Chief Executive of the HKMA. "It is encouraging that the ratio of delinquent negative equity loans has declined. Nevertheless, the situation is one which requires close attention by authorized institutions."

For details, please refer to the Annex.

For further enquiries, please contact:

Jasmin Fung, Manager (Press), at 2878 8246 or
Thomas Chan, Senior Manager (Press), at 2878 1480

Hong Kong Monetary Authority
14 August 2003

 

1The figures derived from the survey relate only to RMLs provided by authorized institutions on the basis of first mortgages and which the reporting institution knows to be in negative equity (i.e. the outstanding loan amount with the reporting institution exceeds the current market value of the mortgaged property). Not included in these figures are some 58,400 RMLs associated with government-funded co-financing schemes and another 23,200 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 authorized institutions do not maintain records on the outstanding balances of the second mortgages.

2Negative equity RMLs delinquent for more than three months as a percentage of total negative equity RMLs.

Last revision date: 1 August 2011
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