Press Release: Residential mortgage loans in negative equity December quarter

Residential mortgage loans in negative equity
December quarter

The Hong Kong Monetary Authority announced today (Friday) 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 survey results indicate that the number of RMLs in negative equity increased to 76,686 (with a value of HK$127 billion) at end-December 2002 from 70,112 at end-September, reflecting the further decline in property prices in the three-month period.

Extrapolating the December survey figures to approximate the position of the banking sector as a whole, the number of RMLs in negative equity would be about 78,000, with a value of HK$129 billion. The unsecured portion of these loans is estimated at about HK$28 billion or 5.1% of the total residential mortgage lending of the banking sector.

The three-month delinquency ratio of RMLs in negative equity remains higher than that on the mortgage portfolio as a whole (1.06%). However, it improved to 2.62% at end-December from 2.92% at end-September.

The average interest rate being charged to negative equity homeowners was 0.83% below the best lending rate (BLR) at end-December, compared with 0.76% below BLR at end-September and 0.70% below BLR at end-June. 58% of negative equity homeowners were being charged below BLR at end-December, compared with 55% at end-September and 52% at end-June. These numbers reflect authorized institutions' responsiveness in reducing negative equity homeowners' repayment burden by lowering interest rates.

The results of the survey are at the Annex.

For further enquiries, please contact:

Sylvia Yip, Manager (Press), at 2878 1687 or
Thomas Chan, Senior Manager (Press), at 2878 1480

Hong Kong Monetary Authority
7 February 2003

Annex

Key Results of the Survey of Residential Mortgage Loans in Negative Equity

Table 1: Aggregate position of 27 Authorized Institutions*

	End-December 2002	End-September 2002	End-June 2002
Total outstanding number	76,686	70,112	66,941
As % of total mortgage borrowers	16%	15%	14%
Total outstanding value	HK$127 bn	HK$118 bn	HK$115 bn
As % of total outstanding value	24%	22%	21%
Loan-to-value ratio	127%	128%	127%
Weighted average interest rate	BLR-0.83%	BLR-0.76%	BLR-0.70%

* The number of AIs is reduced to 27 from 28 due to bank consolidation.

Table 2: Extrapolated results^# (grossed up to 100% of Authorized Institutions)

	Total outstanding number	Total outstanding value
End-December 2001	73,000	HK$125 bn
End-March 2002	67,500	HK$115 bn

End-June 2002	68,252	HK$118 bn
End-September 2002	71,296	HK$120 bn
End-December 2002	77,935	HK$129 bn

# For end-December 2001 and end-March 2002 only based on 7 Authorized Institutions accounting for about 74% of the industry total. Thereafter based on 27 Authorized Institutions accounting for about 98% of the industry total.

¹ The figures derived from the survey relate only to RMLs provided by the banks on the basis of first mortgages and which the banks know to be in negative equity. Not included in these figures are 61,876 RMLs associated with government-funded co-financing schemes and another 22,908 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 banks do not maintain records on the outstanding balances of the second mortgages.