Hong Kong Mortgage Corporation

Hong Kong Mortgage Corporation chief hints at price rises in risky property market

Head of Mortgage Corporation hints at review of prices to manage firm's exposure to volatility

PUBLISHED : Tuesday, 16 April, 2013, 12:00am
UPDATED : Tuesday, 16 April, 2013, 5:32am

Homebuyers may have to pay more for mortgage insurance because the leading provider, the Hong Kong Mortgage Corporation, is looking to offset its risk in guaranteeing their loans in a risky property market where prices remain at near-record highs.

Its chief executive, Raymond Li Ling-cheung, did not rule out yesterday the possibility of price increases in its mortgage insurance programme.

The government-owned firm has previously revised its programme to manage exposure to volatility in the market, he said.

"I see the risk is still at a high level, and we are more concerned about risk exposure than the volume of our business," Li said at a news conference to present the corporation's results for last year.

There had been a slight improvement in property market risk after the government introduced fresh cooling measures in February, but he remained cautious in view of the high prices.

Property prices have increased far more than people's incomes in recent years, making homes less affordable to most.

Now that Bank of China (Hong Kong) and Hang Seng Bank have launched fixed-rate mortgage plans, Li said the corporation would promote its fixed-rate mortgage plan as well, but he said the firm would not compete on price.

The corporation's net profit fell 10.4 per cent last year on the previous year to HK$1.13 billion as its two key businesses shrank. New loans drawn under the mortgage insurance programme fell 16.3 per cent to HK$22 billion.

Purchases of income-generating loan assets fell 91 per cent to HK$865 million as banks awash in liquidity felt less need to sell them to the firm to raise cash.

Li said he expected purchases of loan assets to stay low while easy liquidity prevailed. The firm bought just HK$46 million of loan assets in the first quarter.

The two key businesses were shrinking because of the economic cycle, Li said, but the firm's policy initiatives businesses were growing. These are a reverse mortgage scheme, a microfinance programme and a financing guarantee scheme for small and medium-sized enterprises.

Li said cash flow from these businesses has enabled the firm to pay a higher dividend to the government - a total of HK$750 million, more than double the HK$350 million for 2011.

Only the corporation had the capital strength and responsibility to introduce the "not profitable" policy initiatives business for the government, Li said.