Developers’ aggressive loan schemes could put financially weak buyers at risk if Hong Kong home prices fall, analysts say

Minmetals Land, the developer of Montego Bay in Yau Tong, has come up with a plan that allows buyers to defer payments for two years

The interest rate on the ‘Super Easy First Mortgage Loan’ plan works out to 5.5 per cent at present, versus 1.61 per cent for a Hibor-linked plan

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Work progresses on mainland Chinese developer Minmetals Land’s Montego Bay residential project in Yau Tong in June 2022. Photo: Xiaomei Chen

Published: 8:30am, 15 Jun 2022

Developers’ aggressive mortgage schemes to drum up home sales could put financially weaker buyers at risk if property prices trend downwards and end up costing more in the long-term, according to market observers.

Minmetals Land, the developer of Montego Bay in Yau Tong, has come up with a plan offered by a local financial institution that allows buyers to defer repayment of mortgage loans of 80 per cent of the flat’s value plus interest to the third year after they move in.

“After making the purchase and paying the 20 per cent [down payment], they can move in,” said Allen Fong, Minmetals Land’s sales and marketing director. “For two years, they do not have the extra burden of mortgage repayments.”

Buyers who opt for the “Super Easy First Mortgage Loan” with a 25-year tenor will be charged 0.125 percentage points above the best lending rate, which currently stands at 5.375 per cent, from the 25th month onwards.

Potential home buyers line up at Minmetal Land’s sales office for the Montego Bay residential project in November 2020. Photo: Xiaomei Chen

It is higher than the prevailing mortgage rate linked to the Hong Kong Interbank Offered Rate (Hibor) of around 1.61 per cent for ordinary financing plans. The one-month Hibor currently stands at 0.3 per cent.

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