Lender expands mortgage portfolio
Hang Seng Bank yesterday became the first lender to offer mortgages with more than 70 per cent loan-value ratio for properties that have completed the government's building rehabilitation scheme.
The move marked another aggressive step by the city's No2 lender to expand its mortgage portfolio. Earlier this year, it beat its rivals in easing lending policies for the purchase of older properties, extending the limit on the combined age of property and loan tenor to 60 years from 40 years.
The rehabilitation scheme, undertaken by the Urban Renewal Authority (URA) and the Hong Kong Housing Society, provides financial assistance to owners of buildings of more than 20 years old to renovate their properties. The URA said there were 11,000 buildings eligible for the scheme.
Hang Seng's assistant general manager and head of consumer finance John Lam Cheung-wah said buyers of rehabilitated properties could now apply for secondary mortgages under either the Hong Kong Mortgage Corp's Mortgage Insurance Programme or the bank's top-up mortgage plan, which allowed customers to apply for separate tenors for their primary and secondary mortgages.
But these borrowers were likely to be charged higher interest rates than those buying newer properties, Mr Lam said.
He estimated pricing for rehabilitated mortgages would be prime rate minus 2.3 percentage points to prime minus 2.6 points, compared with prime minus 2.7 points for standard mortgages.
'On average, we expect loan sizes of these rehabilitated property mortgages to be smaller than those under normal schemes,' Mr Lam said. 'Our usual policy has been to determine interest rates according to loan sizes, while the quality of the buildings would also play a part in our decisions.'
He expected nearly 110,000 flats in the city - mostly located in mature districts such as Shamshuipo, Cheung Sha Wan and Tai Kok Tsui - to benefit from the schemes.
'We hope what we're doing will help boost the property market. What happened before was that as it was difficult to get mortgages for these buildings, owners had few incentives to rehabilitate their properties because they didn't think they would be able to sell them,' Mr Lam said. 'Now, they want to improve the conditions and hope to sell the flats at the highest prices possible.'