New mortgage lending continued to decline in September, according to the HKMA's monthly survey of residential mortgage lending.
The amount of gross new loans made in September decreased by 8.7% to $8.9 billion from $9.7 billion in August (compared with the 20.2% decline in August). The average size of new loans decreased to $1.44 million in September from $1.45 million in August.
New loans approved during the month increased by 8.9% to $9.6 billion ($8.8 billion in August). Refinancing loans continued to grow and accounted for 35.6% of new loans approved (25.7% in August). Loans approved during the month but not yet drawn also rose by 8.6% from $6.6 billion in August to $7.2 billion in September.
The average loan-to-value ratio of new loans approved fell slightly to 58.02% (58.92% in August) and the average contractual life to 204 months (205 months in August). 99.3% of these loans were related to owner-occupied properties.
On the pricing front, 90.4% of the new loans were granted at the best lending rate (82.5% in August). Loans granted at below the best lending rate for the whole term of the mortgage amounted to 1.1% of the new loans approved (compared with 1.3% in August).
The amount of outstanding mortgage loans increased by 0.04% in September, compared with a 0.02% fall in August. The annualised rate of growth of outstanding loans in the three months to September decreased to 1.4% from 4.4% in August. The average change over the last twelve months fell to 6.6% from 7% in August.
The loan delinquency ratio (measured by the ratio of mortgage loans overdue for more than 3 months to total outstanding mortgage loans) rose marginally to 1.12% as at September 1999 (compared with 1.11% in August).
"The growth in refinancing loans continued to be a noteworthy feature of the market in September," said Mr David Carse, Deputy Chief Executive of the HKMA. "While the competitive strategy for mortgage business is a commercial matter for individual institutions, it is right that they should keep that strategy under review in the light of overall market conditions. In particular, they should note that an aggressive refinancing strategy may simply be self-defeating if competitors retaliate and if it drives down the return on their existing mortgage portfolio. Institutions should also ensure that they maintain prudent lending criteria, including continued adherence to the 70% loan-to-value ratio, and proper standards of conduct in the marketing of loans when competition intensifies. We have today issued a letter to all authorised institutions to set out these views."
Gross loans for the purchase of properties in Mainland China increased from $38 million in August to $104 million in September. The amount of outstanding loans decreased by 0.7% to $6.7 billion.
Hong Kong Monetary Authority
29 October 1999
Notes to Annex
Annex
