Survey on residential mortgage loans in negative equity

On the basis of information obtained from an ad-hoc survey of a sample of banks conducted by the Hong Kong Monetary Authority (HKMA) last week, it is estimated that the total number of bank customers whose loans are in negative equity (i.e. whose outstanding loan exceeds the current market value of their property) may be around 65,000, or 14% of total mortgage borrowers. The total value of mortgage loans in negative equity may be around HK$127 billion, or 23% of total outstanding mortgage loans.

"The number of 65,000 is somewhat lower than some other estimates that have been mentioned," said Mr Y K Choi, Acting Deputy Chief Executive of the HKMA. "However, this only takes account of loans from banks. The number will be higher once account is taken of second mortgages, such as co-financing loans from developers, on which we have no information."

According to the data collected, 31.0% of customers whose loans are in negative equity are currently being charged above Best Lending Rate (BLR)(only 0.3% are being charged at BLR + 2% or above); 15.6% are being charged BLR; and 50.8% are being charged below BLR. The average rate being charged is BLR - 0.27%.

"The fact that half of the loans are being charged below BLR may have reflected the increased competition in the residential mortgage market, under which banks are more willing to discuss mortgage terms with loan customers," said Mr Choi.

The HKMA announced last week that it would not object if authorized institutions, should they judge it commercially desirable, were to offer refinancing loans of up to 100% of current market value to homeowners in negative equity.

"Banks have responded positively and some have already introduced refinancing packages, which should help provide a degree of relief to homeowners in negative equity," Mr Choi said.

For further enquiries, please contact:

Caitlin Wong, Manager (Press), at 2878 1687 or
Thomas Chan, Senior Manager (Press), at 2878 1480

Hong Kong Monetary Authority
16 October 2001