Chartered tightens rules on lending
STANDARD Chartered Bank has tightened mortgage lending by raising charges on applicants and making stricter assessments of borrowers' repayment ability.
Since last Friday, the bank has imposed a fee of $2,500 on all mortgage applications. Previously, only successful applicants had to pay $1,500. At the beginning of the year, the charge was $1,000.
The new policy is seen as a strategy to avoid overly exposing the bank to mortgage lending where the potential risk is rising due to spiralling home prices.
To ensure a safe mortgage portfolio, the bank is also making stricter assessments of borrowers' repayment ability.
It wants monthly mortgage repayments to account for not more than 40 per cent of the borrower's household income, against the usual level of 50 per cent.
The cautious approach signals the banking industry's concern over the continued increase in home prices, and also dampens hopes for an early relaxation of the 70 per cent mortgage limit.
In fact, certain banks have recently lowered to 60 per cent the mortgage ceiling for luxury flats.
Banks say they are firm on upholding the 70 per cent mortgage ceiling following another round of increases in home prices in recent months.
Before that, some were willing to offer mortgages of up to 75 per cent of the property's value through various tactics such as making a higher valuation of the property concerned.
The successful sale of 494 residential units at Villa Athena in Ma On Shan over the weekend confirmed that buyers and speculators were active despite the unfavourable mortgage lending conditions.
However, the mass residential market is expected to be constrained by income growth and the required down-payment of 30 per cent of a flat's value.
