Buyers seek alternatives as banks tighten loans
Homebuyers are seeking out alternative lenders as banks adopt a conservative approach to approving home loans amid continuing worries about falling property prices.
Pan Asian Mortgage, which launched its mortgage brokerage services in July, and mReferral Mortgage Brokerage Services are two firms profiting from the global credit crisis as banks tighten lending.
Frankie Wong, the chief operating officer at Pan Asian Mortgage, said the firm had seen a rise in new business recently as banks gave some customers the cold shoulder.
People buying flats in the second-hand market over the past three months have had difficulty securing loans to cover 95 per cent of the property value, the maximum allowed.
The Hong Kong Mortgage Corp insures mortgages covering up to 95 per cent of the price of a property.
As the global financial crisis deepens, Mr Wong said, banks were becoming more wary about extending loans to marginal borrowers. The most highly geared borrowers would be trapped in negative equity if property prices fell by 5 per cent, he added.
Mr Wong said his firm's brokerage service arm could refer people turned down by the leading banks to other financial institutions or smaller banks.
However 'they will be charged higher interest rates', he said.
Such borrowers are often required to pay up to two percentage points above the prime rate.
Sharmaine Lau, the chief economic analyst at mReferral Mortgage Brokerage Services, said more homebuyers were approaching the company to seek mortgage financing as banks became more cautious.
'It is not uncommon to see buyers who bought new flats during the market boom late last year having trouble getting sufficient property valuations [for the purpose of a mortgage] now,' she said.
Buyers of some new projects, such as Harbour Place in Hunghom, have been forced to dump their units at a steep discount of 20 per cent as they did not want to complete the purchase by seeking a mortgage loan that would increase the cost of the transaction.
Hendrick Leung Lee-chung, a director and general manager at Centaline Finance, said banks were not keen to extend mortgage loans unless it was to quality customers.
'People working in investment banks and the insurance sector will find it difficult to obtain sufficient mortgage loans because of the uncertain outlook of their industries,' he said.
Last month's sales of residential units dropped 22 per cent by value from a year earlier to HK$18.7 billion after declining 59 per cent in August, the Land Registry said yesterday.
'We will keep a close eye on the delinquency trend. Our mortgage customers should continue to meet strict criteria, such as the debt-to-income ratio, to ensure they are able to pay off mortgage debt,' said Frederick Chan Hoi-kit, a general manager at Chong Hing Bank.
Most customers were buying homes to live in, not for speculation, he said.