Homebuyers can now borrow up to 95% of property value

The Mortgage Insurance Programme (MIP) operated by the Hong Kong Mortgage Corporation will be expanded, with the maximum loan-to-value (LTV) ratio being increased from the current limit of 90% to 95%.

Mortgage loans on both completed properties and properties under construction (equitable mortgage loans) are eligible for coverage up to an LTV ratio of 95% for a maximum loan of $5 million and a maximum loan period of 30 years.

"The Mortgage Insurance Programme is a comprehensive industry-wide programme catering for the whole of the banking sector and covering both the primary and secondary property markets," the HKMC Chairman, Financial Secretary Henry Tang, said today (July 28).

"I am pleased to see that the corporation continues to play a useful role in ensuring that the benefits of mortgage insurance are available to a wide range of eligible homebuyers and mortgage lenders."

The corporation's vice chairman, Hong Kong Monetary Authority Chief Executive Joseph Yam, said the HKMC pioneered development of the MIP in Hong Kong in April 1999.

"The programme now allows potential home buyers to borrow up to 95% of the value of the property and at the same time enables the banks to keep their exposure within the 70% LTV level stipulated by the Hong Kong Monetary Authority. This creates a win-win scenario," he said.

The eligibility criteria and insurance premium levels for the new 95% LTV product can be downloaded on the HKMA website, www.hkma.gov.hk

Meanwhile, the HKMA's monthly survey of residential mortgage lending shows that the level of activity in the residential mortgage loan market in June was similar to that in May.

New loans drawn down during June rose by 0.4% to $10.5 billion. New approvals also increased, by 1.4% in value terms to $11.8 billion and by 3.1% in number terms to 7,880 cases.

A 38.9% increase in the number of new approvals for primary market transactions more than offset a 6.1% reduction in secondary market transactions. The number of new applications increased by 8%.

The outstanding amount of mortgage loans declined by 0.1% to $524.2 billion, while the mortgage delinquency ratio improved further to a 5-year low of 0.57% from 0.63% in May.

Ends/Wednesday, July 28, 2004