Hong Kong realtors unveil ‘zero down payment’ home lending scheme

Hong Kong's two largest property agencies, Midland Realty and Centaline Property Agency, are offering “zero down payment” schemes to existing home owners in a bid to drum up sales, a move that challenges the Hong Kong Monetary Authority tightening mortgage policy, which is intended to temper soaring property prices.

mReferral Mortgage Brokerage Services, a unit of Hong Kong-listed Midland Holdings, will lend up to 130 per cent of the value of a flat, up to a maximum of HK$20 million, through financial institutions from Tuesday.

“It should be a breakthrough in Hong Kong’s mortgage lending industry,” said Sharmaine Lau Yuen-yuen, mReferral’s chief economic analyst. "We are in talks with different developers to offer this scheme for their new projects.”

Ricacorp Properties estimated that new flat supply would climb to a 12-year high this year with a potential 33,891 units in the sales pipeline.

With ample new supply, developers face huge competition for buyers at a time of stricter mortgage policy, rising stamp duties and likely additional interest rate tightening.
Cheung Kong Property executive director Justin Chiu said it would offer an unprecedented home financing plan to push the sale of its soon-to-be launched luxury project, Crescendo, in Yuen Long.

The project, comprised of 67 villas with sizes ranging from 1,500 square feet to 2,400 sq ft, is targetted at upgraders.
mReferral’s scheme come hours after its rival Centaline Mortgage Broker announced a 120 per cent loan to value ,mortgage for its customers through the group’s finance unit.

“We can also increase the lending cap to 130 per cent as our partner is also under the same group as us,” said Ivy Wong Mei-fung, managing director of Centaline Mortgage Broker.

Customers of mReferral will receive a 30-year financing loan of up to 130 per cent of the flat’s value, much higher than the standard bank mortgage ceiling of 60 per cent for flats below HK$10 million, and 50 per cent for those more than HK$10 million.

The offer only applies to buyers who already own a flat, Lau said.

The mortgages will be provided by a finance company which is not subject to regulatory supervision by the HKMA.

Under the mReferral plan, buyers will receive a loan-to-value ratio, or LTV, up to 80 per cent for their existing home and another 80 per cent for the value of the new flat at 6.5 per cent interest.

This means a potential buyer of a new flat for HK$10 million would not need to pay out of pocket for an initial down payment.
Under the plan, the buyer will receive an 80 per cent LTV of the new flat value, or HK$8 million. For a potential buyer who owns a flat worth HK$6 million, the maximum loan on this portion would be HK$4.8 million.

Up to HK$4.8 million could be borrowed against a flat worth HK$6 million, using the 80 per cent LTV ratio. In this example, the two mortgages add up to HK$12.8 million.

“The purchasers not only enjoy zero down payment but also receive a HK$2.8 million extra loan,” said Lau. “Our plan’s goal is to assist upgraders to trade up for a bigger flat." 

In response to South China Morning Post inquiry, a HKMA spokesman said the authority would not comment on realtors and financial firms’ lending schemes.