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LCQ16: Co-financing schemes

     Following is a question by the Hon Ng Leung-Sing and a written reply by the Acting Secretary for Financial Services and the Treasury, Ms Julia Leung, in the Legislative Council today (March 20):


     It has been reported that the Hong Kong Monetary Authority has tightened the maximum loan-to-value ratio for residential mortgage loans for a number of times since 2009, and the amount of loans involving co-financing schemes and the percentage of such loans in the new mortgage loans approved increased from $1.479 billion and 0.45% in 2010 to $3.859 billion and 2.01% in 2012 respectively. In this connection, will the Government inform this Council:

(a) of the total amount of loans involving co-financing schemes and the percentage of such loans in the new mortgage loans approved in each year since 2009; and

(b) whether the aforesaid percentages have shown a rising trend since 2009; if so, whether it has assessed what risks such a trend has posed to the stability of Hong Kong's financial system; if it has made such an assessment, of the details; if not, whether it will do so?



(a) According to the information provided by banks to the Hong Kong Monetary Authority (HKMA), the annual amount of newly approved first residential mortgage loans involving second mortgages from 2009 to 2012 was between $1.479 billion to $3.882 billion, accounting for 0.5% to 2% of new residential mortgage loans drawn down in the relevant year. Please refer to Annex for details. HKMA does not have information on the amount of second residential mortgages. However, we estimate that it should not exceed one-third of the above amount. Given the small size of second mortgages, its risk to the banking system should not be insurmountable.

     HKMA also notices that mortgage applicants might apply for second mortgages from finance companies without informing the banks concerned. Although these finance companies are not regulated by HKMA, HKMA has taken initiatives to conduct a review on some new property developments, and found that such cases, accounting for less than 1% of the total number of units of these developments, were not common.

(b) Banks are required to comply with the supervisory requirements set by HKMA when considering first mortgage applications for properties involving second mortgages. In particular, banks should take into account all outstanding debt obligations of a mortgage applicant, including the monthly repayment amount under a second mortgage when assessing the debt-servicing ratio and the stressed debt-servicing ratio of the applicant. In addition, banks are not allowed to provide loans to property developers or finance companies to facilitate the provision of second mortgages by these entities. Finance companies related to banks are not allowed to provide second mortgages that exceed the applicable overall loan-to-value ratio cap set by HKMA.

Ends/Wednesday, March 20, 2013
Issued at HKT 15:53


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