HONG KONG — At the same time as Hong Kong has decreased down-payment necessities to assist younger professionals and households to purchase houses, banks are beefing up mortgage utility requirements to make sure that a recession doesn’t saddle them with unhealthy loans, bankers and mortgage brokers mentioned.
Final month, Hong Kong Chief Govt Carrie Lam, struggling to revive confidence in her administration after 5 months of civil unrest, authorised guidelines permitting first-time homebuyers to borrow as a lot as 90% of a HK$eight million (£798,513) dwelling’s price.
Earlier, such a excessive ratio was solely permitted on properties value half as a lot. The transfer elevated gross sales of used houses.
However because the protests take a heavy toll on the particular administrative area’s financial system, banks concern a deepening recession, unemployment and bankruptcies, which may make it laborious for debtors to pay them again, two bankers mentioned.
Traditionally, mortgage delinquency is uncommon in Hong Kong, with a fee of about zero.02%.
HSBC, one of many high mortgage lenders in Hong Kong, lately issued a suggestion that consumers can’t have a mortgage cost that exceeds 65% of their month-to-month revenue, should maintain a full-time job and personal no different property, mentioned two business sources.
Lenders together with HSBC, Normal Chartered and Financial institution of China Hong Kong additionally plan to extend rates of interest for mortgages and cut back money rebates to debtors within the months forward, two bankers mentioned.
The money rebate – primarily a reduction – has come all the way down to as little as zero.5% now, in contrast with a mean of two% earlier this 12 months. Some banks are planning to part it out utterly, they mentioned.
“Now we have to make use of all of the instruments… to guard our profitability and asset high quality on this setting. You will note extra measures within the subsequent few months,” mentioned a Hong Kong-based banker with a European financial institution.
The entire bankers, business sources and mortgage brokers declined to be named as they weren’t allowed to talk to the media.
HSBC mentioned in an announcement that it had continued to just accept new mortgage functions “as typical” because the announcement of the brand new easing initiatives, and functions are thought of on a case-by-case foundation.
Normal Chartered mentioned it could proceed its “prudent strategy to danger administration and returns” and would carefully monitor the market state of affairs to overview its technique. Financial institution of China Hong Kong didn’t reply to a request for remark.
Some banks in Hong Kong have raised rates of interest for brand new mortgages twice since August by a complete of 25 foundation factors, whilst they minimize their finest lending charges lately for the primary time because the world monetary disaster.
A month after Lam’s announcement, property brokers mentioned most consumers of small to medium-sized flats are borrowing extra of the worth of the house, whereas their monetary energy seems to be weaker than earlier prospects’.
“We obtained extra enquiries from purchasers who weren’t clear about their compensation functionality,” mentioned Cookie Wong, a managing director of Ricacorp Mortgage Company. “A few of their revenue solely reaches the underside line of the necessities, in contrast to earlier than, when these shopping for the HK$10 million flats had been far more money ample.”
Hong Kong’s dwelling costs fell four.1% from June to September, however are nonetheless up 5.9% this 12 months.
“The federal government measure is like giving a bank card to the first faculty college students, who should not be shopping for houses. After they purchase at this costly degree, they’re going to be trapped as soon as costs fall,” mentioned a consultant of a property developer, who declined to be named as he was not authorised to talk to the media.
Some analysts, nonetheless, say that so long as the banks preserve stringent borrowing requirements, there can be little systemic danger, and borrowing prices are unlikely to rise sharply within the close to time period.
“We don’t anticipate the banking sector to materially chill out its underwriting requirements. We think about Hong Kong’s banking business danger to be the bottom amongst its friends,” score company S&P mentioned in a report on Oct. 29.
(Modifying by Gerry Doyle)