A rising ratio of problem mortgages has the Hong Kong Monetary Authority (HKMA) warning banks to be cautious about lending policies.
The loan-delinquency ratio - the ratio of mortgage loans overdue for more than three months to total outstanding mortgage loans - climbed to a record 1.27 per cent last month from 1.23 per cent in June.
Despite the declining quality of the loans, the figures showed banks were continuing their year-long mortgage price war - offering low interest rates to build up their mortgage loan books. The authority said 83.2 per cent of the loans granted last month were at an interest rate of 1.5 per cent below the best lending rate for the whole term of the mortgage, up from the 80.7 per cent in June.
Before the mortgage price war began most banks were offering mortgage loans at 1.75 per cent above the best lending rate.
'Keen competition for new mortgage business persisted, as evidenced by some banks offering mortgage rates at a new low of prime minus 2.25 per cent recently,' HKMA acting deputy chief executive Choi Yiu-kwan, said. 'Banks should ensure that they have carefully considered the funding costs and implications for their profitability.'
The authority said the value of new loans taken up last month dropped by 0.3 per cent to HK$10.1 billion, after rising by 3.8 per cent month on month in June.
However, the value of new loan approvals last month rose by 6.1 per cent to HK$13.1 billion, compared with a drop of 7.1 per cent a month earlier.