Residential mortgage loans in negative equity December quarter 2003

Press Releases

12 Feb 2004

Residential mortgage loans in negative equity December quarter 2003

The Hong Kong Monetary Authority announced today the results of its latest survey on residential mortgage loans (RMLs) in negative equity1.

The number of RMLs in negative equity declined further by almost one-third (around 32,200 cases) over the three-month period to around 67,6002 with a value of HK$107 billion at end-December. The unsecured portion of these loans is estimated at about HK$23 billion, down from HK$33 billion at end-September. The overall loan-to-value ratio on negative equity loans increased slightly to 128% from 127% at end-September, as loans that were marginally in negative equity were no longer in negative equity following the recent recovery in property prices. Reflecting the higher associated risks of loans having a high loan-to-value ratio, the weighted average interest rate on the outstanding portfolio of negative equity RMLs was 0.94% below the best lending rate (BLR), compared with 1.09% below BLR at end-September. In total, about 57% of the negative equity homeowners are paying an interest rate below BLR.

Benefiting from the upturn of the economy which helped strengthen repayment ability, the value of delinquent negative equity RMLs decreased. As a result, the three-month delinquency ratio of negative equity RMLs3 improved to 2.11% from 2.16% at end-September.

"The sharp decline in the number and amount of mortgage loans in negative equity back to around the level in March 2002 is encouraging," said Mr William Ryback, Deputy Chief Executive of the HKMA. "If the recent recovery in property prices is maintained, the negative equity problem should ease further."

For details, please refer to the Annex.

For further enquiries, please contact:

Kevin Ip, Manager (Press), at 2878 1687 or
Thomas Chan, Senior Manager (Press), at 2878 1480

Hong Kong Monetary Authority
12 February 2004

 

1 The mortgage portfolio of the surveyed authorized institutions represents about 98% of the industry total. The survey results have been extrapolated to approximate the position of the banking sector as a whole.

2 The 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 65,170 RMLs associated with government-funded co-financing schemes and another 27,480 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.

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

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Last revision date : 12 February 2004