Residential mortgage loans in negative equity September quarter

The Hong Kong Monetary Authority announced today the results of the latest survey on residential mortgage loans (RMLs) in negative equity¹. This is the first publication of negative equity data based on a new expanded survey of 28 authorized institutions (AIs), which gives more complete coverage of mortgage lending than the previous survey.

The last published data, based on the previous survey of seven AIs (grossed up to approximate the banking sector as a whole) indicated that there were around 67,500 cases of RMLs in negative equity at the end of March.

From the new expanded survey, it can be seen that the number of cases of RMLs in negative equity fell in the second quarter but rose again in the third quarter.

Specifically, the number of RMLs in negative equity at end-June fell to 66,941, but rose to 70,112 at end-September, reflecting falling property prices.

The average interest rate being charged to negative equity homeowners was 0.76% below the best lending rate (BLR) at end-September, compared with 0.70% below BLR at end-June and 0.60% below BLR at end-March. And 55% of negative equity homeowners were being charged below BLR at end-September, compared with 52% at end-June. These numbers indicate that AIs have been granting lower interest rates to an increasing number of negative equity homeowners, thereby helping to alleviate their repayment burden.

The results of the survey are at the Annex.

For further enquiries, please contact:

Sylvia Yip, Manager (Press), at 2878 1687 or
Thomas Chan, Senior Manager (Press), at 2878 1480

Hong Kong Monetary Authority
30 October 2002

Annex

Key Results of the Survey of Residential Mortgage Loans in Negative Equity

1. The figures derived from the survey relate only to RMLs provided by the banks on the basis of first mortgages and which the banks know to be in negative equity. Not included in these figures are 62,120 RMLs associated with government-funded co-financing schemes and another 21,723 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 banks do not maintain records on the outstanding balances of the second mortgages.