New mortgage lending continued to decline in October, according to the HKMA's monthly survey of residential mortgage lending.
The amount of gross new loans made in October decreased by 8.3% to $8.1 billion from $8.9 billion in September (compared with the 8.7% decline in September). The average size of new loans decreased to $1.37 million in October from $1.44 million in September.
New loans approved during the month increased by 1.2% to $9.7 billion ($9.6 billion in September). Refinancing loans continued to grow and accounted for 40.2% of new loans approved (35.6% in September). Loans approved during the month but not yet drawn declined marginally by 0.5% from $7.2 billion in September to $7.17 billion in October.
The average loan-to-value ratio of new loans approved fell to 57.1% (58.0% in September) and the average contractual life to 200 months (204 months in September). 99.3% of these loans were related to owner-occupied properties.
On the pricing front, 89.3% of the new loans were granted at the best lending rate (90.4% in September). Loans granted at below the best lending rate for the whole term of the mortgage amounted to 1.9% of the new loans approved (compared with 1.1% in September).
The amount of outstanding mortgage loans increased by 0.13% in October, compared with a 0.04% rise in September. The annualised rate of growth of outstanding loans in the three months to October decreased to -0.2% from 1.4% in September. The average change over the last twelve months fell to 6.2% from 6.6% in September.
The loan delinquency ratio (measured by the ratio of mortgage loans overdue for more than 3 months to total outstanding mortgage loans) rose to 1.16% as at October 1999 (compared with 1.12% in September).
"The rise in the loan delinquency ratio is not too worrying in view of the improving macroeconomic environment," said Mr. David Carse, Deputy Chief Executive of the HKMA. "But it reinforces the need for banks not to relax their lending standards as they compete for the limited amount of new business. Much of this competition continues to be channelled into refinancing loans, as shown by the further rise in the proportion of such loans in October. The HKMA's letter issued on 29 October 1999 advised authorised institutions to review carefully their strategy for such loans."
Gross loans for the purchase of properties in Mainland China decreased from $104 million in September to $31 million in October. The amount of outstanding loans decreased by 1.1% to $6.57 billion.
Hong Kong Monetary Authority
29 November 1999
Annex
Notes to Annex
- Residential mortgage loans in the survey refer to loans (which include refinancing loans) to private individuals for the purchase of residential properties, including uncompleted flats, but excluding flats in the Home Ownership Scheme, Private Sector Participation Scheme and Tenants Purchase Scheme. Mortgage loans to corporate clients are excluded from the survey.
- Gross new loans made refer to mortgage loans which are actually drawn down during the month.
- New loans approved refer to mortgage loans which are approved during the month. The loans can either be drawn down in the same month or in the following months. The loans which are approved but not yet drawn down are shown under the item "New loans approved during month but not yet drawn". This figure will have implications for the amount of gross new loans made in the following months.
- Mortgage loans are classified as overdue when an instalment payment is overdue for more than 3 months and remains unpaid at the last day of the reporting month. The delinquency ratio is the weighted average of the ratio of the total amount of overdue loans over the total outstanding mortgage loans.
- Co-financing schemes refer to those schemes which involve the provision of top-up loans by the property developer (or other co-financiers) in addition to the mortgage loans granted by banks. Only the portion of loans granted by banks are reported in the survey.
- Average loan-to-value ratio, average contractual life and owner-occupied properties are all weighted average figures, which are weighted by the amount of new loans approved during month by individual banks.
