First-time buyers go for mortgages

Local | Amy Nip 5 Dec 2019

The Hong Kong Mortgage Corporation has approved some 1,300 mortgage applications of which 90 percent are first-time homebuyers, following the government's relaxation on mortgage requirements.

In the Policy Address, Chief Executive Carrie Lam Cheng Yuet-ngor announced raising the mortgage cap for first-time homebuyers, with the value of property eligible for 90 percent loan-to-value ratio doubled to HK$8 million.

For an 80 percent ratio, the cap on value will be raised to HK$10 million from HK$6 million.

In a written reply to lawmakers Chan Chun-ying and Paul Tse Wai-chun, Secretary for Financial Services and the Treasury James Lau Yee-cheung said the 1,300 applications were approved by the HKMC's Mortgage Insurance Program from October 17 to November 22.

Lawmakers questioned the effectiveness of the measure in helping first-time homebuyers as property prices rebounded after the policy address, at the time ending a four-month downward trend.

A number of residential property owners with properties valued at between HK$5 million and HK$10 million withdrew their flats or raised their prices. Transaction prices of select properties rose by almost 20 percent.

Lau, in response to whether the government had foreseen such situations, said fluctuations in the property market are affected by many factors.

"The government has time and again reminded potential homebuyers to carefully consider their needs and repayment ability before making a decision on buying a property. The HKMC will closely monitor the property market condition and evaluate the effectiveness of the program in due course," he said.

The official explained the change in value cap was aimed at helping first-time homebuyers, or people wishing to upgrade their homes, who have sufficient repayment abilities but cannot afford the down payment.

Borrowers are still required to meet a number of criteria, including meeting a 50 percent debt-to-income ratio and paying extra premium for risk mitigation purposes.

For applicants with mortgage loans exceeding a loan-to-value ratio of 80 percent, the HKMC Insurance has imposed additional eligibility criteria, including that borrowers must be first-time homebuyers and have regular paying salaries.

While Chan suggested the government allow first-time homebuyers to use their Mandatory Provident Fund accumulated contributions to pay for down payments, Lau was not convinced.

The objective of MPF is to help the working population meet basic retirement needs, Lau said in his reply.

"As a matter of fact, in December 2018, the average accrued benefits of MPF members was only HK$186,000. Therefore, the actual effect of early withdrawal of part of their accrued benefits for helping home purchase is limited," he wrote.

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