Mortgages rose sharply last month, but analysts warned the 39.5 per cent increase in loans drawn down - to HK$8.6 billion - did not signal a turning point in the depressed property market. 'The mortgage numbers typically reflect S&P numbers [sales and purchase data published by the Land Registry], one month in arrears,' said CLSA head of regional property research John Saunders. 'So you are looking at the outcome of a jump for August sales - which was driven mainly by the release of the Park Island development by Sun Hung Kai, which sold some 2,600 units in one hit,' he said. Salomon Smith Barney property analyst Robert Wong and Daiwa analyst Jonas Kan agreed that the loan data did not signal a turnaround. Mr Saunders said last month's S&P numbers had risen to 6,858 from 5,620 in August, with primary sales up from 1,086 to 3,454. He expected October's S&P number to fall back to 6,000, split roughly half and half between primary and secondary sales. The mortgage data released by the Hong Kong Monetary Authority (HKMA) also showed that the value of loans approved last month rose 19.6 per cent to HK$9 billion 'driven by a 75.3 per cent increase in primary market transactions'. By comparison, the HKMA said, new approvals for refinancing loans and secondary market transactions declined by about 20 per cent during the month. The divergent outcomes for primary market and secondary market lending reinforced the view from analysts that it was mainly the aggressive marketing of new property developments that caused the spike in mortgage lending, and that home owners dumped into negative equity by falling prices could not expect early relief. Rating and valuation department data released last month showed that residential prices had slumped 60 per cent from their October 1998 peaks to 10-year lows. The number of negative equity home-owners whose outstanding mortgage loans were now higher than the depressed value of their properties rose to 70,112 at the end of the third quarter, the HKMA said - versus 66,941 at the end of June. The data also showed no let-up in the repricing effect which lowers the yield earned by banks on their mortgage portfolios as they reduce the interest rate charged on new loans. Last month 89.6 per cent of new loans approved were priced at more than 2 per cent below prime, versus 86 per cent in August; while 43.2 per cent of these new loans were advanced at more than 2.5 per cent below prime - up from 35.3 per cent in August. Graphic: loan31gbz