Banks say they are ready to follow and some have in fact already imposed stricter mortgage rules.

HKMA chief executive Norman Chan Tak-lam on Tuesday met executives of five banks that are major players in the mortgage market to propose reviving a measure that was used when home prices peaked in 1997.

The measure was later scrapped in 2000.

Chan suggested a higher downpayment for luxury flats priced at HK$20 million or more.

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He also told lenders to tighten due diligence on both professional valuation and income proof to reduce risks at a time when home prices are spiraling upward.

Stephen Man Wai-shing, head of secured lending, consumer banking at Standard Chartered, said the bank has not received any new guidelines on mortgages but believes that once new rules are imposed, market risks will be reduced.

He said Standard Chartered already offers mortgages of 60 percent of the value of a luxury home.

A Bank of China (Hong Kong) (2388) spokeswoman said the lender requests those who invest in luxury homes to pay a downpayment of at least 40 percent.

The Hongkong and Shanghai Banking Corporation said it limits those who buy flats priced at HK$40 million or more to a 60 percent mortgage.

And Hang Seng Bank (0011) said it will follow any rules laid down by the HKMA.

However, both banks and the property sector have reservations about the measures.

"Properties that cost more than HK$20 million account for less than 10 percent of total transactions," said Centaline Property senior research manager Wong Leung-sing. "And most of the buyers are cash-rich - they don't need to borrow much from banks."

Wong added: "Its only a signal the HKMA wants to send out."