New mortgage approvals surge to 17-month high

PUBLISHED : Friday, 22 December, 2006, 12:00am
UPDATED : Friday, 22 December, 2006, 12:00am

Project launches draw huge demand as banks engage in refinancing price war

New home loan approvals rose to HK$15.7 billion in November, a 17-month high, as new property projects attracted buyers and lenders waged a mortgage refinancing price war.

A Hong Kong Monetary Authority survey of 23 major lenders found that new loans were 33.2 per cent higher last month than in October, following declines in three consecutive months.

'There were several large new property development sales in November. This led to a substantial increase in new mortgage applications,' said Peggy Tam Lai-king, head of secured loans at Hang Seng Bank.

Louis Chan Wing-kit, an executive director at Centaline Property Agency, said the surge in new loan approvals was driven mainly by banks' aggressive mortgage lending policies. A price war began in Hong Kong last month, but the cause was the August decision by the US Federal Reserve to declare a moratorium on interest rate rises.

As market sentiment improves, developers have accelerated the launch of new residential projects. Some have combined with banks to offer mortgages for as little as 2.8 percentage points below prime lending rates, Mr Chan said.

New projects which met with a strong response last month included Sun Hung Kai Properties' Park Island in Ma Wan, Cheung Kong (Holdings)' Le Point in Tseung Kwan O, and Grand Waterfront in To Kwa Wan, jointly developed by Henderson Land Development and Hong Kong and China Gas.

Patrick Chow, head of research at Ricacorp Properties, said buying interest had revived in September and October because some people expect interest rates will soon enter a downward phase. 'It will definitely speed up end-users' buying decisions,' he said.

New mortgage loans approved earlier but drawn down last month increased by 8.9 per cent to HK$10.5 billion.

Mortgage approvals for new flats increased by HK$1.8 billion, or 62 per cent, from October. New loans for secondary market purchases rose by HK$1.3 billion or 21 per cent. Refinancing loans increased by HK$800 million or 29.3 per cent.

The proportion of new loans approved at more than 2.5 percentage points below the best lending rate fell to 54.8 per cent from 58.1 per cent in October.

About 40.3 per cent of mortgage loan applications approved were not based on prime lending rates, indicating an increase in the number of loans priced in reference to the Hong Kong interbank offered rate.

The outstanding value of mortgage loans was little changed at HK$526.2 billion last month.

The mortgage delinquency ratio - mortgage loans overdue as a percentage of total mortgage loans outstanding - dropped to 0.19 per cent from 0.21 per cent in October.