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    HKMA Announces Amendments to Mortgage Insurance Program for Banks

    October 16, 2019

    HKMA notified that HKMC Insurance Limited (HKMCI) announced amendments to the Mortgage Insurance Program. HKMA has reviewed the revised terms of the Mortgage Insurance Program and is agreeable to authorized institutions granting residential mortgage loans to eligible mortgage borrowers under those terms. The Mortgage Insurance Program is a market-based financial product that aims to promote home ownership. The amended Mortgage Insurance Program became effective from October 16, 2019.

    HKMA explains that the objectives of the Mortgage Insurance Program offered by HKMCI and the countercyclical macro-prudential measures on property mortgage loans introduced by HKMA are different. HKMCI manages its risks through adjustments to the mortgage insurance premiums while following risk-based principles. This differs from the countercyclical macro-prudential measures of HKMA, the intent of which is to ensure stability of the banking system through implementation of appropriate measures corresponding to the development of the property cycle, taking into consideration key factors such as the trend of property prices, property transaction volume, economic fundamentals, and the external environment. HKMA does not consider it appropriate to relax the countercyclical macro-prudential measures at this juncture. HKMA will closely monitor the market situation and introduce appropriate measures as and when necessary to safeguard banking stability.

    The following amendments will be made to the Mortgage Insurance Program for completed residential properties, to provide assistance to home buyers with immediate housing needs:

    • The maximum property value eligible for mortgage loans up to 80% loan-to-value (LTV) ratio is HKD 10 million.
    • For mortgage loans with up to 90% LTV ratio applicable to first-time home-buyers, the maximum property value is HKD 8 million.
    • For home buyers taking mortgage loans with property values going beyond the existing caps, an additional 15% premium will be charged which can be paid together with mortgage repayment on a monthly basis.
    • The maximum debt-to-income (DTI) ratio for both the above-mentioned and the existing Mortgage Insurance Program loans will be set at 50% and borrowers have to meet the stressed DTI ratio.

    Effective Date: October 16, 2019

    Keywords: Asia Pacific, Hong Kong, Banking, LTV, Macro-Prudential Measures, HKMCI, HKMA, Mortgage Insurance Program, Credit Risk

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