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SCMP Reporter

But some developers offer even tastier sweeteners, including secondary mortgages and cash rebates

Twenty-one-year-old Shirley Chan had  never thought of buying a flat  until a property agent informed her about the 95 per cent mortgage introduced in late July.

Ms Chan was browsing for a flat to rent in Wan Chai (because she wanted to move out  of her $7,000-a-month flat in Heng Fa Chuen) when her  agent informed her that the rent she expected to pay was more than enough to cover monthly instalments on a mortgage.

'All I  had to do  was pay a down payment of about $70,000, and I  could have my own apartment in a very accessible area, so I thought 'why not?'' said Ms Chan,  who  works in the hotel industry.

Aware that her repayments would be more than the usual 70 per cent mortgage scheme because of the 5 per cent down payment, fluctuating interest rates and insurance premium costs,  Ms Chan   made a swift decision  and bought  a $1.2 million  flat in Wan Chai.

Her monthly instalments are about  $4,000 - roughly a fourth of her monthly income.

Ms Chan said new projects that came with attractive insurance plans subsidised by developers were not as desirable as units in relatively old districts.

'There is virtually no choice for new projects on Hong Kong Island   within my budget,' she said. 'Therefore,  the new mortgage plan was a big attraction to me.'

Ms Chan was among the 650 hopefuls who applied  for the 95 per cent mortgage scheme introduced  by the Hong Kong Mortgage Corporation (HKMC) on July 29.

'The result [of introducing the scheme] was quite encouraging,' said Kenny Fok Tze-chun, senior vice-president of HKMC.

Mr Fok  said the average mortgage loan was $2 million, and about 70 per cent were for secondary properties.

However, the HKMC has not yet released the total number of mortgage insurance applications, which stood at  959 in June.

According to the Hong Kong Monetary Authority, 8,018 new mortgage loans were approved in July, up from 7,880 in June.

Many flat seekers who have more flexible budgets prefer to opt for a bigger down payment than carry the burden of higher interest rates and insurance premiums.

One such flat seeker is Chan Siu-yin, a 26-year-old medical laboratory technician. Ms Chan and her boyfriend are looking for a flat for about $2 million in North Point.

'As we  have sufficient budget to pay a 30 per cent down payment, I don't see the point in  paying more interest in the future. A larger down payment is less risky,'  said Ms Chan.

The HKMC imposes a nominal mortgage ceiling of 70 per cent of a property's assessed value. The body  introduced the mortgage insurance programme in 1999, providing banks with insurance cover of up to 15 per cent of the value of a property, thereby raising the effective mortgage ceiling to 85 per cent.

The  body then boosted the cover to 20 per cent in 2001, allowing qualified buyers to get a mortgage of up to 90 per cent, provided they paid  a premium - usually 2.15 per cent to 3.35 per cent of the total loan amount.

Liu Chong Hing Bank manager Brian Cheung Nam-chung  said the 95 per cent mortgage was attractive in a relatively low interest rate environment. 'But it is not that attractive compared with some developers' joint ventures with banks in providing flat seekers secondary mortgages and incentives such as cash rebates that effectively reduce the property price,' he said.

Mr Cheung said flat seekers should also pay attention to the scheme's debt-to-income ratio, which could not exceed 45 per cent when the loan maturity was over 25 years.  The loan was  also restricted to self-occupied properties.



Loan scheme lures new buyers