A HONGKONG securities house has forecast an end to the Government's controversial home loans ceiling by the end of this year or early next year. Lehman Brothers claimed the criteria for the 70 per cent mortgage lending ceiling was now ''history''. The firm believes a rise in United States interest rates will force the authorities into a ''phased relaxation'' of the scheme in the final quarter of this year. However, Li Kwong-fai, the head of banking supervision at the Hongkong Monetary Authority, said it was too early to predict the rate at the end of this year. ''At the moment we have the 70 per cent rule and we are sticking to that,'' he said. ''Some banks have more stringent rules than that and I think property prices have gone up recently.'' Mr Li said any changes would ''depend on the circumstances at the time''. The Government's guideline to banks - issued 19 months ago - has come under fierce attack from sections of the real estate industry. It was introduced in an attempt to stop speculation in the mass residential market, which was driving prices through the roof. But estate agents and developers are looking for changes to allow first-time buyers back into the market. Lehman Brothers property analyst Michael Leary said a jump in US interest rates would trigger off a similar rise here because the Hongkong dollar was hedged against its US counterpart. He said: ''This would bring on additional pressure for those wanting to buy property. ''That would really harm the first-time buyer whose participation in the market has slowed a great deal. ''They are already finding it difficult enough making repayments. That would only make the situation worse. ''I feel the Government would be forced to address the issue. ''We expect a phased relaxation to mortgage lending for residential property to be introduced perhaps by the end of this year or early next year. '' Mr Leary urged the Government to introduce a similar scheme for first-time buyers as its sandwich class plan. A limited number of people earning between $20,000 and $40,000 per month are being offered loans to help with the 30 per cent down payment needed to buy a home. In Washington last week, Alan Greenspan, the chairman of the Federal Reserve, issued a stern warning that the central bank was ready to raise interest rates to dampen any signs of accelerated inflation. Although price pressures moderated in May and June, he told the US House of Representatives banking sub-committee on economic growth that inflation figures were disappointing because of ''worrying'' price increases earlier in the year. He warned that an ill-timed easing of short-term interest rates could cause an inflation flare up, even when the economy appeared slack. Hongkong analysts believe a rise of two per cent would force the Government into a mortgage lending re-think. A reduction in the growth of the territory's Gross Domestic Product, most likely to be caused by the curbs on the Chinese economy, would also raise the pressure. Victor Kwok, an analyst with stockbrokers Smith Newcourt, said it could be a ''logical step''. ''If they raise it by a half per cent then I don't think there will be an impact,'' he said. ''But a two per cent rise would make a big difference. ''Forty per cent of the business US companies do is with Europe and if Europe doesn't pick up then we are more liable to see a US interest rate rise. ''I think for the next 12 months interest rates will be a minor factor but in the second half of next year who knows.'' Paul Burke, head of research at Colliers Jardine, did not expect to see changes in the near future. He said: ''If there is an interest rate rise, which starts going into percentage points, then, of course, the Government will have no option but to review.'' Prices in the mass residential market are moving up again after a lengthy period of relative stability. After the Government announced the mortgage guidelines and introduced stamp duty, prices dropped by an average of 10 to 20 per cent. First-time buyers have largely been squeezed out of the market although developers have been offering up to 90 per cent mortgage financing deals.
