The average size of new mortgages issued last month hit a record high as investors dived into Hong Kong's hot property market.
Mortgage loans approved last month increased by 29 per cent compared with the previous month to HK$25.2 billion. The number of mortgage applications also rose by 31.8 per cent to 14,023 from July. The average repayment period of new mortgages reached a record of 25.5 years, as the average size swelled to HK$2.63 million.
Raymond Yeung, a senior economist at ANZ bank, said he expected this month's figures to be even higher, as "some smart buyers could have rushed to invest in property" during the time between US Federal Reserve chairman Ben Bernanke's hints about new quantitative easing measures, and when the Hong Kong Monetary Authority announced steps to make second mortgages harder to get.
The US announced a new round of easing on September 14, and said US interest rates would remain low until 2015. The Hong Kong dollar's link to the US dollar means local rates also will remain low. Worried about an asset bubble, the HKMA, the city's de facto central bank, quickly moved to tighten requirements for second mortgages.
Mortgage demand could drop significantly in the fourth quarter as a result of the HKMA measures, according to mortgage consulting firm mReferral.
Last month, 93 per cent of mortgage loans were priced on the prime lending rate instead of Hibor, or Hong Kong interbank offered rate.
Hibor-pegged mortgages became popular after the rate dipped in line with falling interest rates in 2008. But in the second half of last year, investors began switching back to mortgages based on the prime-lending rate.
Ivy Wong Mei-fung, managing director of Centaline Mortgage Broker, said she expected home buyers to continue to favour mortgages based on the prime lending rate, as she did not expect quantitative easing measures to significantly lower Hibor.
The interest rate for a Hibor-based mortgage is about 2.13 per cent. Mortgage rates based on the prime-lending rate are about 2.2 per cent, said Wong.