Money lender Hitachi Capital (HK) is teaming up with mortgage broker mReferral to offer home loans of up to 95 per cent of the price of a flat, with the loan capped at HK$5 million.
The move comes after the Hong Kong Mortgage Corp's decision in February to tighten eligibility for payment protection insurance on home loans.
Currently, homebuyers can secure up to 90 per cent of the price of homes worth HK$4 million or less through mortgage insurance from the HKMC, down from the previous ceiling of HK$6 million.
"We hope to expand our market share in mortgage lending as well as assist buyers with sound repayment ability to make home purchases amid credit tightening," said Anthony Hong, executive director at Hitachi Capital, which specialises in offering car loans.
When homebuyers take out loans worth more than the standard 70 per cent value of a property from banks, the corporation insures the portion of the loan exceeding the threshold.
Hong said Hitachi Capital's scheme would allow successful applicants to purchase homes worth up to HK$5.5 million.
Sharmaine Lau Yuen-yuen, chief economist at mReferral Mortgage Services, said nearly 30 per cent of its clients bought homes worth HK$5 million or less. Loan applications would be judged on repayment ability.
The scheme, targeting first-time buyers for completed flats, charges higher interest rates than major banks, with mortgage rates at three percentage points below the prime rate in the first three years and 1.5 percentage points below prime afterwards.
With Hitachi's prime rate at 5.25 per cent, the effective lending rate would be 2.25 per cent in the first three years and 3.75 per cent afterwards. Major banks offer mortgage rates in the range of 2.4 per cent to 3.5 per cent for the entire loan tenor.
Frankie Wong Kin-shing, chief operating officer at mortgage broker and property consultancy Pan Asian Mortgage, said his firm had no plans to follow Hitachi's example, adding that other financial institutions already provide 95 per cent loans at higher rates.
The HKMC's tightening measures are in keeping with the policy direction of the city's de facto central bank, Hong Kong Monetary Authority chief executive Norman Chan Tak-lam said in a publication yesterday. Chan is the vice-chairman of the HKMC.