NEW RELEASE
New mortgage lending continued to decline in August, according to the HKMA's monthly survey of residential mortgage lending.
The amount of gross new loans made in August decreased by 20.2% to $9.7 billion from $12.2 billion in July (compared with the 13.5% decline in July). The average size of new loans decreased to $1.45 million in August from $1.49 million in July.
New loans approved during the month decreased by 16.6% to $8.8 billion ($10.5 billion in July). Refinancing loans accounted for $2.3 billion (25.7%). Loans approved during the month but not yet drawn also fell by 13.7% from $7.7 billion in July to $ 6.6 billion in August.
The average loan-to-value ratio of new loans approved increased to 58.92% (56.49% in July) and the average contractual life to 205 months (201 months in July). 99% of these loans were related to owner-occupied properties.
On the pricing front, 82.5% of the new loans were granted at the best lending rate (the same as in July). However, loans granted at below the best lending rate for the whole term of the mortgage amounted to 1.3% of the new loans approved reflecting the keen competition for mortgage business.
The amount of outstanding mortgage loans decreased by 0.02% in August, compared with the 0.3% growth in July. The annualised rate of growth of outstanding loans in the three months to August decreased to 4.4% from 9.1% in July. The average change over the last twelve months fell to 7% from 7.7% in July. This indicates that the competition in the mortgage market has not generated significant new business.
The loan delinquency ratio (measured by the ratio of mortgage loans overdue for more than 3 months to total outstanding mortgage loans) declined to 1.11% as at August 1999 (compared with 1.13% in July).
"The decline in the loan delinquency ratio for the third consecutive month provides further indication that the quality of the mortgage portfolio is improving," said Mr. David Carse, Acting Chief Executive of the HKMA. "However, the proportion of refinancing loans has risen significantly in recent months. This indicates that the aggressive marketing efforts of banks (including the use of cash rebate or equivalent to property agents for business referrals) is tending to increase the amount of switching of existing mortgages rather than generating new business. The effect therefore is to increase the volatility of banks' loan portfolios while driving down the return from mortgage business. The HKMA believes that this is a potentially unhealthy situation, and that greater restraint by banks in their marketing efforts may be called for."
Gross loans for the purchase of properties in Mainland China decreased from $46 million in July to $38 million in August. The amount of outstanding loans decreased by 1.4% to $6.74 billion.
Hong Kong Monetary Authority
30 September 1999
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