HKMA Adjusts Countercyclical Measures for Property Mortgage Loans

The
Hong
Kong
Monetary
Authority
(HKMA)
has
issued
a
circular
to
banks
detailing
technical
adjustments
to
the
countercyclical
macroprudential
measures
for
property
mortgage
loans,
initially
announced
on
February
28,
2024,
according
to
the

HKMA.

Expansion
of
Measures

The
applicability
of
these
measures
has
been
broadened
to
include
mortgage
applications
for
residential
properties
under
construction
for
self-occupation.
This
adjustment
pertains
to
provisional
sale
and
purchase
agreements
signed
before
February
28,
2024,
with
properties
scheduled
for
completion
on
or
after
this
date.
Effective
immediately,
eligible
homebuyers
can
now
secure
mortgage
loans
with
a
maximum
loan-to-value
(LTV)
ratio
of
up
to
70%.

Addressing
Market
Trends

Considering
the
recent
trends
in
the
residential
property
market,
some
homebuyers
who
purchased
properties
under
construction
using
stage
payment
plans
may
now
find
the
valuation
of
their
properties
lower
than
the
purchase
price.
This
discrepancy
can
create
challenges
in
securing
additional
funds
for
the
down
payment.
The
HKMA
acknowledges
this
issue
and
has
slightly
adjusted
the
measures
to
support
homebuyers
facing
genuine
hardship,
allowing
for
higher
LTV
ratios
while
upholding
effective
risk
management
in
banks’
mortgage
lending
practices.

Focus
on
Genuine
Home
Ownership
Needs

The
HKMA
emphasized
that
the
adjustments
target
buyers
with
genuine
home
ownership
requirements.
The
authority
also
reminded
the
public
that
purchasing
property
is
a
long-term
financial
commitment,
urging
prospective
buyers
to
carefully
evaluate
the
associated
risks
and
their
financial
capacity.

Additional
Supervisory
Adjustments

In
tandem
with
these
changes,
the
HKMA
announced
refinements
to
other
supervisory
requirements:
simplifying
the
calculation
of
borrowing
capacity
under
net
worth-based
lending
and
reducing
the
haircuts
on
rental
income
from
at
least
30%
to
an
indicative
level
of
at
least
20%
when
calculating
the
debt
servicing
ratio
for
borrowers
with
investment
properties.

Ongoing
Monitoring

The
HKMA
reassured
that
it
will
continue
to
closely
monitor
market
developments
and
introduce
further
measures
as
needed
to
ensure
banking
stability
amid
evolving
property
market
conditions.

Hong
Kong
Monetary
Authority
14
June
2024

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source:
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