Credit curbs force Cheung Kong to offer 2nd mortgage to flat buyers

PUBLISHED : Friday, 25 February, 2011, 12:00am
UPDATED : Friday, 25 February, 2011, 12:00am

Tighter credit conditions have forced Cheung Kong (Holdings) to provide a 20 per cent second mortgage for buyers of its Tai Wai housing project and interest and principal repayment waiver for the first two years.

The developer's special payment scheme comes three months after the Hong Kong Monetary Authority urged banks to lower their loan-to-valuation ratios for flats priced more than HK$8 million, in an attempt to curb speculation.

Loan to valuation is the loan as a percentage of the property price that a buyer can get from a bank.

Yesterday, Cheung Kong announced the price list for 108 units at its Festival City phase two development in Tai Wai. The prices ranged from HK$7.7 million to HK$10.5 million. More than 80 per cent of the units are priced over HK$8 million.

From November, the maximum mortgage ratio for properties priced between HK$8 million and HK$12 million was cut from 70 to 60 per cent. The amounts banks could lend to buyers of homes worth HK$12 million or more was cut from 60 per cent to 50 per cent of the price.

Cheung Kong's financial arm, AMTD Strategic Capital, has now started offering a special payment scheme called Easy Go to provide financing for potential buyers. It includes a second mortgage of 20 per cent on top of the banks' 60 per cent loan ceiling for flats worth more than HK$8 million.

Buyers who opt for this will be charged an interest rate of 2.5 per cent below prime, or 2.75 per cent per year, for 20 years. The best lending rate stands at 5.25 per cent.

'It is just like offering a bridging loan for buyers in a bid to facilitate purchase. The special payment scheme allows buyers to defer the repayment of the second mortgage for two years,' said Sammy Po, a director of Midland Realty, New Territories.