The Hong Kong Monetary Authority announced today the results of the latest survey on residential mortgage loans (RMLs) in negative equity1. The mortgage portfolio of the surveyed authorized institutions represents about 98% of the industry total. The results below have been extrapolated to approximate the position of the banking sector as a whole.
The number of RMLs in negative equity reduced by around 5,900 (5.6%) over the three-month period to around 99,800 with a value of HK$155 billion at end-September. The unsecured portion of these loans is estimated at about HK$33 billion, down from HK$36 billion at end-June. The overall loan-to-value ratio on these negative equity loans lowered marginally to 127%, reflecting a mild pick-up in property prices.
As a result of a decrease in the value of delinquent negative equity RMLs, the three-month delinquency ratio of negative equity RMLs2 improved to 2.16% from 2.28% at end-June.
The average interest rate charged on negative equity RMLs fell further to 1.09% below the best lending rate (BLR) at end-September compared with 1.07% below BLR at end-June. In total, about 63% of the negative equity homeowners are paying an interest rate below BLR.
"The negative equity problem appears to have eased somewhat as indicated by the decline in the number and amount of mortgage loans in negative equity for the first time since June 2002 and the improvement in their asset quality," said Mr William Ryback, Deputy Chief Executive of the HKMA. "It is hoped that this positive development will continue along with the overall improvement of the economy."
For details, please refer to the Annex.
For further enquiries, please contact:
Kevin Ip, Manager (Press), at 2878 1687 or
Thomas Chan, Senior Manager (Press), at 2878 1480
Hong Kong Monetary Authority
11 November 2003
1 The figures derived from the survey relate only to RMLs provided by authorized institutions on the basis of first mortgages and which the reporting institution knows to be in negative equity (i.e. the outstanding loan amount with the reporting institution exceeds the current market value of the mortgaged property). Not included in these figures are some 61,150 RMLs associated with government-funded co-financing schemes and another 24,800 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 authorized institutions do not maintain records on the outstanding balances of the second mortgages.
2 Negative equity RMLs delinquent for more than three months as a percentage of total negative equity RMLs.