Non-residential Mortgage Cap Relaxed

The Monetary Authority today announced that the countercyclical macroprudential measures for mortgage loans on non-residential properties will be relaxed from August 20.

The applicable loan-to-value ratio caps for mortgage loans on non-residential properties will be adjusted upward by 10 percentage points, from 40% to 50% for general cases.

The authority’s Chief Executive Eddie Yue said the COVID-19 outbreak has led to significant pressure on the Hong Kong economy.

“While the residential property market has remained firm, we have seen major corrections in prices, as well as transaction volumes, of different types of non-residential properties including offices, flatted factories and retail premises.

“With the pandemic and escalating geopolitical tensions continuing to weigh on business confidence, non-residential property markets are likely to remain under pressure.”

Taking into account factors such as the price trends of non-residential properties, transaction volumes, economic fundamentals, and the external environment, the authority considers it appropriate to adjust the countercyclical macroprudential measures on non-residential properties.

He added that the outlook for Hong Kong’s economy and the property market remains highly uncertain.

The authority will monitor developments closely and introduce appropriate measures in response to changes in the property market cycle to safeguard banking stability.

The authority also reiterated in its circular to banks today that its countercyclical macroprudential measures are intended to apply to mortgage loans to finance property transactions or the refinancing of existing properties.

The measures are not intended to apply to credit facilities secured by properties to finance the business operation of corporates, as those facilities are subject to a set of comprehensive credit underwriting standards and regular credit reviews by authorised institutions.