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SCMP Reporter

Move seen as shift from price war

Hong Kong homebuyers will be able to get 40-year mortgages for the first time under new loan plans offered by the government-run Hong Kong Mortgage Corp.

HKMC, which works in partnership with banks in granting housing loans,  is extending the maximum loan tenor of its mortgage insurance programme (MIP) from 30 to 40 years,  the longest  in the market.

The move is seen as part of  intensifying competition for mortgage customers.

MReferral Mortgage Brokerage Services, which also partners banks on home loans, yesterday said it would start to offer plans with  interest rates as low as  4.75 per cent for the full term, the lowest among similar loan packages.

'I think competition will further intensify as banks would like to get more business, especially as the property market  has been active recently,' said Kenneth Tsin Wai-lun, a senior mortgage distribution manager at Bank of East Asia.

New home loans approved last month rose  57.4 per cent from February to HK$16.3 billion,  Hong Kong Monetary Authority data shows.

The number of property transactions in the secondary market  might exceed 7,000 this month,  after increasing 3.8 per cent to 5,879 deals  by Tuesday  from 5,662  last month, according to real estate agent Hong Kong Property.

Mr Tsin expected lenders to launch products with different features to attract customers, rather than just cutting prices.

HKMC chief executive James Lau said yesterday the agency extended the loan tenor of MIP to provide a wider choice  for potential homebuyers.

Borrowers  seeking a tenor longer than 30 years under the MIP would have to meet stringent requirements,  such as the sum of the property age and the loan tenor should not exceed 60 years, compared with 70 years for a 30-year tenor.

The premium will be between 6 per cent and 15 per cent higher than the current MIP premium.

The premium charged on MIP loans of up to 30 years stands at 1 per cent to 3.98 per cent.

MReferral, which said it partnered a bank to offer mortgages to homebuyers referred by  Midland Realty and Hong Kong Property, is offering a plan at prime rate (7.75 per cent) minus three percentage points, or 4.75 per cent, for a loan amount of HK$2.5 million or  larger.

Full-term mortgage rates  range from 4.82 to 4.85 per cent, although some banks offer cash rebates to lure customers.

A banker said if  cash rebates were taken into account, there would not be much  difference in the absolute rate. 'There's not much room for lenders to cut mortgage rates further,'  he said.

DBS Bank  yesterday launched a mortgage plan targeting homebuyers who were  below 35 years old.

The plan allows borrowers to reduce the repayment amount in the first 10 years of a 30-year loan and increase  it in the last 20 years.

Separately, HKMC reported a 13.5 per cent growth in after-tax profit  last year to HK$682.7 million,  the highest since it was established in 1997.



Mortgages with 40-year tenor on HKMC cards