The new mortgage insurance programme might encourage homeowners to refinance their mortgages to take advantage of reduced borrowing rates, lowering banks' mortgage portfolio returns.
The programme, managed by the Hong Kong Mortgage Corp (HKMC), allows homebuyers to top up their mortgage borrowings to 85 per cent of the property value from the existing 70 per cent.
The 15 per cent top-up portion is guaranteed by mortgage insurance provided by leading insurers through the HKMC.
The corporation yesterday signed contracts with 26 banks enabling them to offer mortgages with loan-to-value ratios up to 85 per cent starting from today.
Leading banks participating in the programme are offering customers incentives ranging from subsidies for solicitors' fees, mortgage insurance premiums and even cash in the form of credit card advances in an effort to attract more business.
When property prices are trending downwards, homeowners can refinance existing mortgages by using the programme which enables them to borrow as much as they did under their original deals because the loan-to-value ratio is being increased.
