Mortgage insurance market set for boost from HOS

Big rises announced by the government last week in the income and asset caps for applicants seeking to buy subsidised housing will create a new market for insured home loans, say analysts.

The change will mean many more individuals and families who may not have enough savings to put down a 30 per cent deposit on a home purchase in the private secondary market will be able to buy an HOS home, said Poon Kwok-yuen, managing director of QBE Mortgage Insurance (Asia).

To assist such buyers and give lenders some security to provide loans of up to 90 per cent on the value of a home, the government set up a Mortgage Insurance Protection Scheme in 1999.

Under the scheme, a buyer may put down a deposit of just 10 per cent on a home purchase. If a mortgage goes into default, the insurance covers a loss of principal on the mortgage loans above 70 per cent up to a maximum of 90 per cent of the property value at the time the loan was taken out.

With home sales on the decline - the latest data showed 12 housing estates recorded zero deals last week - banks are now likely to turn to the expanded HOS market for insured loans, said analysts.

The QBE Mortgage Insurance group has entered into partnerships with Hang Seng Bank, Standard Chartered Bank and Fubon Bank to offer mortgage insurance on home loans.

"Negotiations with other banks are under way," said Poon. He said the approval requirements and the premium charges for its mortgage insurance products were the same as the conditions applied by the biggest provider of mortgage protection insurance, the Hong Kong Mortgage Corporation (HKMC).