Citic Ka Wah Bank - pioneer of a 140 per cent home loan - yesterday unveiled a mortgage package designed to help home-owners escape a negative equity trap and buy a new house. The aggressive bid to capture new home lending business was expected to add about 800 mostly new customers and HK$1 billion to the mid-tier lender's HK$13 billion mortgage loan portfolio, Lorraine Lam Lau Tak-mi, the bank's senior vice-president and head of retail banking said. The 'SuperFirst Mortgage Home Switching Flexi-plan' announced by Mrs Lam followed on the launch earlier this year of a 140 per cent negative equity refinancing scheme which to date had secured more than 1,000 applicants for loans totalling HK$1.3 billion, the bank said. The exposure of the bank itself to such borrowers is limited to the 70 per cent loan-to-valuation ceiling monitored by banking regulator, the Hong Kong Monetary Authority. But by parcelling together a loan product that includes insurance offered by the Hong Kong Mortgage Corp as well as unsecured top-up finance provided by a third-party special purpose vehicle called Pan Asian Mortgage Co, Citic Ka Wah earlier this year offered a first of its kind 140 per cent loan to enable negative equity home-owners to refinance their existing properties at lower interest rates. Negative-equity home-owners are borrowers who have seen the value of their homes fall below the size of their loans. Until Citic Ka Wah introduced its pioneering scheme, that meant such home-owners found it difficult to refinance their properties at the record low mortgage rates now on offer, because the collateral they could offer - the houses they occupied - was insufficient to secure a new loan. The result was that they were paying much higher interest rates on their loans than home-owners who provided the banks with sufficient collateral. To date the 140 per cent loan scheme has been used to refinance loans on existing properties, but Citic Ka Wah said it would now offer the same service to home-owners who wanted to sell their existing property and trade up or down into a new property. The latest innovative product from Citic Ka Wah was a direct response to the findings of a customer survey by the bank, said Freda Li, senior vice-president and head of retail marketing. 'We asked existing customers of our 140 per cent loan scheme if they wanted to move and 83 per cent said no,' Mrs Li said. 'But 60 per cent said they might consider moving in three to five years and 43 per cent of these respondents said they would put off the move because they had no money to pay down the negative asset portion of their existing loans, and another 6 per cent said they had no money to meet down-payments on a new house. 'So you have 50 per cent of customers saying they don't want to move only because they don't have the money to move,' Mrs Li said. Asked why they would want to move if they were able to, 44 per cent of respondents said their existing properties were now too small and another 24 per cent said they wanted to move to locations that offered better transportation and facilities. 'We have launched the new plan for two reasons,' Mrs Lam said. 'Firstly, to assist those negative equity home-owners who would like to switch property but were restrained by limited financial resources and secondly in support of the government's recently announced measures to stabilise the property market.'
