Homebuyers rush for cover that allows 95pc mortgages
The 95 per cent mortgage insurance programme has proven popular with borrowers, having received 4,200 applications since its launch in July last year, according to Kenny Fok Tsz-chun, a senior vice-president of Hong Kong Mortgage Corp (HKMC).
The HKMC began offering its mortgage insurance programme in 1999 - enabling buyers to cover loans worth 80 per cent of a property's value instead of the usual cap of 70 per cent.
The programme was repeatedly extended, to 85 per cent and 90 per cent, and then 95 per cent in July.
Mr Fok said that in the past five months, 40 per cent of all mortgage insurance programme applications were for 95 per cent loans.
'This has shown there is a demand for the 95 per cent mortgage insurance scheme,' he said.
'The programme has helped those who can afford the monthly repayments but do not have enough money for a 30 per cent down payment.'
He said the average loan for a mortgage insurance borrower was $1.8 million for a property valued at $2 million. Under the 70 per cent ceiling, a $600,000 deposit was needed for such a property. At 95 per cent, that falls to just $100,000.
'This has made a big difference to borrowers,' Mr Fok said.
On average, borrowers who apply 95 per cent mortgage insurance make repayments worth 40 per cent of household income.
Most mortgage insurance applications come from people buying second-hand flats, which Mr Fok said indicated many developers were offering their own financing packages for new homes.
Meanwhile, the HKMC and the Hong Kong University are carrying out a feasibility study on a 'reverse mortgage' scheme in Hong Kong, which would allow elderly homeowners to fund their retirement by re-mortgaging their properties in return for an income while they continued to live in them.
When the homeowner dies, the bank repossesses and sells the property to recover the loan. Any surplus from the sale is returned to the homeowner's estate.
Such schemes exist in the United States, Britain, and Australia.
'The reverse mortgage can help those elderly people with limited cash on hand but who own a residential unit,' Mr Fok said.
'The study is to find out if there is a demand, then we will work with banks to see if they would be interested in offering the products.'