Residential Mortgage Survey Results for May 1999

New mortgage lending increased significantly in May, according to the HKMA's monthly survey of residential mortgage lending.

The amount of gross new loans made in May increased by 50.4% to $13.8 billion from $9.1 billion in April (compared with the 2.6% decline in April). The average size of new loans increased to $1.53 million in May from $1.42 million in April.

New loans approved during the month increased by 3.9% to $15.4 billion (14.8 billion in April). Loans approved during the month but not yet drawn also rose by 0.5% from $11.1 billion in April to $11.2 billion in May.

The average loan-to-value ratio of new loans approved was 57.0% (57.9% in April) and the average contractual life was 204 months (215 months in April). 99.2% of these loans were related to owner-occupied properties.

Reflecting the significant growth in new mortgage lending, the amount of outstanding mortgage loans increased by 1.14% in May, compared with the 0.54% growth in April. The annualised rate of growth of outstanding loans in the three months to May increased to 8.9% from 5.6% in April. The average change over the last twelve months also rose to 8.2% from 7.7% in April.

The loan delinquency ratio (measured by the ratio of mortgage loans overdue for more than 3 months to total outstanding mortgage loans) in May 1999 remained at the same level of 1.16% as in the preceding month.

The mortgage price war further intensified in May. 86.6% of the new loans approved were granted at the best lending rate (compared with 83.8% in April).

"I am glad to see the zero increase in the loan delinquency ratio for May, although a longer time will be needed to see whether the deterioration in asset quality has indeed stabilized," said Mr. Y K Choi, acting Deputy Chief Executive of the HKMA.

"The HKMA is, however, concerned about the intensifying mortgage price war and about the long term implications of this on the profitability of banks. Institutions are reminded to maintain prudent policies on property lending, including the maximum 70% loan-to-value ratio and a prudent debt to income ratio on residential mortgages," added Mr. Choi.

Gross loans for the purchase of properties in Mainland China decreased from $103 million in April to $25 million in May. The amount of outstanding loans decreased by 2.05% to $7.1 billion.

Hong Kong Monetary Authority

24 June 1999

Attachments:
Notes to Annex
Annex