Hong Kong's mortgage loan approvals climb 29 per cent in August

The average size of new mortgages issued last month hit a record high as investors dived into Hong Kong's hot property market.

Mortgage loans approved last month increased by 29 per cent compared with the previous month to HK$25.2 billion. The number of mortgage applications also rose by 31.8 per cent to 14,023 from July. The average repayment period of new mortgages reached a record of 25.5 years, as the average size swelled to HK$2.63 million.

Raymond Yeung, a senior economist at ANZ bank, said he expected this month's figures to be even higher, as "some smart buyers could have rushed to invest in property" during the time between US Federal Reserve chairman Ben Bernanke's hints about new quantitative easing measures, and when the Hong Kong Monetary Authority announced steps to make second mortgages harder to get.

The US announced a new round of easing on September 14, and said US interest rates would remain low until 2015. The Hong Kong dollar's link to the US dollar means local rates also will remain low. Worried about an asset bubble, the HKMA, the city's de facto central bank, quickly moved to tighten requirements for second mortgages.

Mortgage demand could drop significantly in the fourth quarter as a result of the HKMA measures, according to mortgage consulting firm mReferral.

Last month, 93 per cent of mortgage loans were priced on the prime lending rate instead of Hibor, or Hong Kong interbank offered rate.