Hong Kong considering new mortgage scheme that would slash payments, monthly instalments for subsidised flats, city leader says
- So-called progressive payment scheme would see down payments and monthly instalments roughly halved
- Chief Executive Carrie Lam says government hopes to allow residents, including those waiting for public housing, to ‘leapfrog’ renting and purchase homes instead
Hong Kong is considering a new mortgage scheme for subsidised flats that would slash down payments by half and allow buyers to defer some of the debt in a bid to make homes more affordable, the city’s leader has said.
Speaking to the media, Chief Executive Carrie Lam Cheng Yuet-ngor said on Wednesday the government hoped to enable residents, including those waiting to be allocated public housing, to “leapfrog” renting and purchase homes instead.
Lam was referring to a so-called progressive payment mortgage mechanism introduced as part of a subsidised home scheme launched by property firm New World Development last month.
Under the developer’s scheme, which covers 300 flats, buyers’ mortgages will be split into two phases. In the first, the buyer will make a down payment of 5 per cent of the total price, as opposed to the customary 10 per cent, then take out a mortgage of up to 30 years for 45 per cent of the unit’s value, as opposed to the usual 90 per cent.
They then have 10 years from the date of the initial transaction to either pay off the remaining 50 per cent without borrowing, either in instalments or all at once, or take out another mortgage to cover it.
The arrangement theoretically allows those who are able to save to pay off the second half of the flat without needing another loan, or alternatively, to defer the debt to a later date when they are earning more and are better able to pay it.
For example, the down payment on a 280 sq ft flat in North Point sold as part of this year’s batch of subsidised homes for HK$2.48 million (US$318,000) would ordinarily be HK$248,000.
Under the proposed new scheme, the down payment for the same unit would only be HK$124,000. The progressive arrangement would also see the amount of the monthly mortgage payments sharply reduced.