Hong Kong Monetary Authority New Property Mortgage Loans Measures: Maximum Loan-to-Value at 70% for Investment or Self-Occupation, All Residential & Non-Residential Mortgage Loans Using Net Worth Criteria Maximum Loan-to-Value Increased to 70% from 60% Which is Same as Using Debt Servicing Ability Criteria, Debt Servicing Ratio Limit for Non-Self-Use Properties Increased to 50% from 40% Which is Same as Self-Used Properties, Removed 10% Decrease on Loan-to-Value Ratio & Debt Servicing Ratio if Borrower Has or Guaranteed Borrowing on Mortgages at Time of Application
18th October 2024 | Hong Kong
The Hong Kong Monetary Authority (HKMA) has released new property mortgage loans measures – 1) Maximum loan-to-value at 70% for investment or self-occupation, 2) All residential & non-residential mortgage loans using net worth criteria maximum loan-to-value increased to 70% from 60% which is same as using debt servicing ability criteria, 3) Debt servicing ratio limit for non-self-use properties increased to 50% from 40% which is same as self-used properties, 4) Removed 10% decrease on loan-to-value ratio & debt servicing ratio if borrower has or guaranteed borrowing on mortgages at time of application. Hong Kong (16/10/24): “The Hong Kong Monetary Authority (HKMA) today (16 October) issued guidelines to banks adjusting the countercyclical macroprudential measures for property mortgage loans. Following the abolition of the demand-side management measures for residential properties by the Government and the adjustments of the supervisory measures for property mortgage loans by the HKMA in February 2024, sentiment in the residential property market has improved. The average monthly housing transaction volume rose from 3,300 units in the first quarter of 2024 to 6,000 units in the second quarter. As market sentiment subsequently softened, the average monthly transaction volume fell back to 3,400 units in the third quarter. Official residential property prices declined by 6.2% in the first eight months of 2024, with a cumulative correction of 26.6% from their peak in 2021. The non-residential property market remained sluggish. In the first eight months of 2024, the prices of offices, flatted factories and retail premises eased further by 17.5%, 11.8% and 13.0% respectively. Meanwhile, the external environment is still facing uncertainties including the pace of US interest rate cuts. The aim of the countercyclical macroprudential measures for property mortgage loans is to introduce appropriate measures in the light of changes in market conditions to ensure that, on the one hand, banks maintain effective risk management and, on the other hand, the measures minimise as far as possible the impact on the public in buying and selling properties. Taking all relevant factors into account, the HKMA considers that there is room to further adjust the countercyclical macroprudential measures, while continuing to maintain banking stability and ensuring the proper risk management of property mortgage loans: (1) The maximum loan-to-value (LTV) ratio for all residential properties will be set at 70%, regardless of the value of the property and whether it is for self-occupation. (2) For mortgage loans assessed based on the net worth of mortgage applicants, the maximum LTV ratio will be adjusted from 60% to 70%, which will be the same as the maximum LTV ratio for mortgage loans assessed based on the debt servicing ability of mortgage applicants. This adjustment is applicable to both residential properties and non-residential properties (including offices, retail shops and industrial buildings). (3) The debt servicing ratio (DSR) limit for non-self-use properties will be adjusted from 40% to 50%, which will be the same as the DSR limit for self-use properties. This adjustment is applicable to both residential properties and non-residential properties. (4) The requirement to lower the applicable maximum LTV ratio and DSR limit by 10 percentage points for mortgage applicants who have borrowed or guaranteed other outstanding mortgage(s) at the time of making a mortgage application will be lifted. After these adjustments, the maximum LTV ratio will be standardised at 70% and the DSR limit will be standardised at 50% for all residential properties and non-residential properties. These adjustments will take effect from today and apply to property transactions with provisional sale and purchase (S&P) agreements signed today or subsequently. The adjustments are also applicable to mortgage applications for properties under construction where the provisional S&P agreements were signed previously and the properties are scheduled for completion on or after today. The HKMA will continue to monitor market developments closely and introduce measures to safeguard banking stability as conditions in the property market evolve.”
“ Hong Kong Monetary Authority New Property Mortgage Loans Measures: Maximum Loan-to-Value at 70% for Investment or Self-Occupation, All Residential & Non-Residential Mortgage Loans Using Net Worth Criteria Maximum Loan-to-Value Increased to 70% from 60% Which is Same as Using Debt Servicing Ability Criteria, Debt Servicing Ratio Limit for Non-Self-Use Properties Increased to 50% from 40% Which is Same as Self-Used Properties, Removed 10% Decrease on Loan-to-Value Ratio & Debt Servicing Ratio if Borrower Has or Guaranteed Borrowing on Mortgages at Time of Application “
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Eddie Yue, Chief Executive of the HKMA: “Taking into account the latest market developments, the HKMA has decided to adjust the countercyclical macroprudential measures for property mortgage loans and revert the maximum LTV ratio and DSR limit to the pre-2009 levels before the countercyclical macroprudential measures were first introduced. Even with these adjustments announced today, the Hong Kong banking sector has ample buffers to cope with any challenges from a sharp correction in property prices. Once again, I would like to remind the public that buying a property is a long-term financial commitment. Prospective buyers should carefully assess the risks involved and their ability to afford a property.”
Hong Kong Monetary Authority New Property Mortgage Loans Measures: Maximum Loan-to-Value at 70% for Investment or Self-Occupation, All Residential & Non-Residential Mortgage Loans Using Net Worth Criteria Maximum Loan-to-Value Increased to 70% from 60% Which is Same as Using Debt Servicing Ability Criteria, Debt Servicing Ratio Limit for Non-Self-Use Properties Increased to 50% from 40% Which is Same as Self-Used Properties, Removed 10% Decrease on Loan-to-Value Ratio & Debt Servicing Ratio if Borrower Has or Guaranteed Borrowing on Mortgages at Time of Application
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