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