31st October 2024 – (Hong Kong) The Hong Kong Monetary Authority (HKMA) announced today that the number of residential mortgage loans (RMLs) in negative equity has surged to 40,713 cases as of 30th September, 2024, marking the highest level since December 2003. This figure represents a staggering increase of over 2.6 times compared to the previous year.
The report highlights a sharp rise from 30,288 cases reported at the end of June 2024, reflecting the ongoing challenges in the local property market. The majority of these negative equity cases are associated with bank staff housing loans or RMLs under mortgage insurance programmes, which typically feature higher loan-to-value ratios.
In terms of financial impact, the aggregate value of these negative equity loans has escalated to HK$207.5 billion, up from HK$155 billion just three months prior. Additionally, the unsecured portion of these mortgages has increased from HK$10 billion to HK$15.8 billion over the same period.
Despite these troubling statistics, the three-month delinquency ratio for RMLs in negative equity remains low, at 0.13% as of the end of September, slightly up from 0.11% in June. This indicates that while the number of negative equity loans has risen, the likelihood of defaults has not significantly increased.
It is crucial to note that the figures only encompass RMLs provided by authorised institutions based on first mortgages known to be in negative equity. Loans associated with co-financing schemes are excluded from this data, as their negative equity status is not recorded by the institutions.
The HKMA’s survey covers approximately 99% of the industry’s mortgage portfolios, providing a comprehensive overview of the banking sector’s current standing in relation to negative equity mortgages. As Hong Kong navigates these challenges, the implications for homeowners and the broader economy remain a point of concern for policymakers and financial experts alike.
Meanwhile, in September, the number of mortgage applications fell by 15.9% month-on-month to 4,977, while approved mortgage loans decreased by 20.6% from August, amounting to HK$17.3 billion. Mortgage loans for primary market transactions dropped 27.2% to HK$5.6 billion, and those for secondary market transactions fell 15.4% to HK$10 billion, with refinancing loans declining 25.1% to HK$1.8 billion. The amount drawn down in September also saw a decrease of 3.6% from August, totaling HK$15.4 billion. The proportion of new mortgage loans linked to HIBOR remained stable at 88.6%, whereas those tied to best lending rates decreased from 6% in August to 4.2% in September. At the end of September, the outstanding value of mortgage loans increased slightly by 0.1% to HK$1,872.8 billion. The mortgage delinquency ratio held steady at a low 0.11%, with the rescheduled loan ratio remaining nearly at 0%.
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