New mortgage-tightening measures to suppress overheated small-sized residential market

Posted: Feb 28 2015Last Updated: Feb 28 2015
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Mr. Norman Chan,  Chief Executive of HKMA28 February 2015 - A deal-breaker to many potential homebuyers, the Hong Kong Monetary Authority (HKMA) announced a new round of measures yesterday to further tighten property mortgage loans.
 
With immediate effect, the maximum loan-to-value (LTV) ratio has been lowered from 70% to 60% for self-use residential properties priced below HKD7M. In other words, buyers will need to pay an extra 10% in down payments, further burdening first-time homebuyers.
 
The maximum debt-servicing ratio (DSR) for self-use and non-self-use properties was also reduced from 50% to 40%, with a stress-DSR reduction from 60% to 50%.
 
Acknowledging the measures’ inevitable effect on first-time buyers and genuine property end-users, Mr. Norman Chan Tak-Lam, Chief Executive of HKMA, explained that these measures are vital to maintaining the stability of the banking and financial system, which also serves to lower the risk of entering the overheated property market should interest rates rise.
 

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