The HK$1 billion (US$128.6 million) program for fixed-rate mortgage loans, proposed in the 2020-21 Budget, could be extended if the market demand is huge, Eddie Yue Wai-man, chief executive of the Hong Kong Monetary Authority, said on Monday.
He said although the interest rates under the plan are higher than floating rates, the program could help homebuyers reduce the risks of interest rate volatility and provide more loan options.
In future, if US interest rates normalize, rates in Hong Kong will also go up. The fixed-rate mortgage could help reduce such a risk
Eddie Yue Wai-man
chief executive of the Hong Kong Monetary Authority
Financial Secretary Paul Chan Mo-po said in his fourth budget last week the Hong Kong Mortgage Corp will offer fixed-rate mortgage loans through banks, with interest rates of 2.75, 2.85 and 2.95 percent per annum for periods of 10, 15 and 20 years, respectively, capped at HK$10 million.
At present, mortgage rates at most of Hong Kong’s commercial banks stand at about 2.5 percent.
But, Yue said since fixed-rate mortgage loans could be as long as 20 years, it may see three or four interest-rate cycles during the period. “In future, if US interest rates normalize, rates in Hong Kong will also go up. The fixed-rate mortgage could help reduce such a risk.”
The HKMA will review the rates under the program from time to time, he said.
Jitters over the novel coronavirus epidemic have brought the local property market to a halt as buyers stay away. According to Centaline Property Agency, only 13 apartments at the city’s 10 largest housing estates changed hands in the first three weeks after the Lunar New Year.
Yue said home prices had surged in the first half of last year, but dipped slightly in the second half as the transaction volume also fell. However, transactions have risen again with more potential buyers viewing flats in the past two weeks.
He believes that even if prices drop, it will not negatively affect the quality of local banks’ assets as the HKMA has introduced several measures, and more measures will be rolled out in future in line with the property market trend.
