The Hong Kong Monetary Authority said there is no need to be overly pessimistic about the city's negative-equity mortgage situation, despite the number of residential mortgages in negative equity hitting the highest since 2003.
Negative equity occurs when the value of the home falls below the remaining balance of the loan.
HKMA deputy chief executive Arthur Yuen Kwok-hang noted that the mortgage delinquency rate remains low at around 0.1 percent, with most cases involving high loan-to-value mortgages under the mortgage insurance program, which requires borrowers to meet additional criteria such as owner-occupancy and stable income to safeguard repayment ability.
This came as the number of Hong Kong residential mortgages in negative equity hit 40,741 cases as of the end March – 6.1 percent higher than the figure for last December, according to the HKMA.
Yuen added that commercial real estate loans currently account for nearly 15 percent of total bank lending in Hong Kong.
He said lenders are unlikely to call loans solely based on falling collateral values and will focus instead on borrowers’ repayment capacity.
He described the related risks as manageable and noted that the HKMA has dedicated substantial regulatory resources to monitoring exposures in both local commercial real estate and mainland developers.
Separately, HKMA deputy chief executive Howard Lee Tat-chi said the bad loan ratio under the 100-percent personal loan guarantee scheme, to support small and medium-sized enterprises, has risen to 14.8 percent, up from 13.5 percent in February.
He said the credit insurers and banks would continue working on managing defaults and debt restructuring, stressing that most borrowers are still meeting their repayment obligations.
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