On 16 Oct 2024, the HKMA standardised prudential measures for property mortgage loans, setting a uniform 70% maximum LTV ratio and 50% DSR limit for all residential and non-residential properties. The adjustments remove differentiated rates based on property type, borrower circumstances, and self-occupation status, effective immediately for new agreements and under-construction properties with post-effective-date completion.
This article was generated using SAMS, an AI technology by Timothy Loh LLP.
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Introduction
On 16 Oct 2024, the Hong Kong Monetary Authority (HKMA) announced adjustments to the countercyclical macroprudential measures for property mortgage loans, standardising key prudential ratios across all property types following market developments and risk assessment.
Key Regulatory Adjustments
The HKMA has revised existing prudential measures to standardise the maximum loan-to-value (LTV) ratio and debt servicing ratio (DSR) limit. Specifically, the LTV ratio for all residential properties is now standardised at 70%, replacing previous differentiated rates based on property value or self-occupation status. For net worth-based mortgage assessments, the LTV ratio has been increased from 60% to 70%, aligning it with debt-servicing-based assessments for both residential and non-residential properties (including offices, retail, and industrial buildings). The DSR limit for non-self-use properties has been raised from 40% to 50%, matching the limit for self-use properties across all property types. The 10-percentage-point penalty for borrowers with existing mortgages is also removed.
Implementation and Scope
These adjustments take effect immediately for property transactions with provisional sale and purchase agreements signed on or after 16 Oct 2024. The changes apply to all residential and non-residential properties, including mortgages for properties under construction where provisional agreements were signed previously but completion is scheduled on or after the effective date. The updated LTV caps and DSR limits are detailed in the Annex, reflecting the standardised framework.
Exclusions and Clarifications
The measures apply exclusively to mortgage loans for property transactions or refinancing, excluding corporate credit facilities secured by properties for business operations, which remain subject to separate underwriting standards. The HKMA reaffirmed that authorized institutions may adjust their net worth-based lending caps based on internal risk assessments without prior HKMA approval, as per the 2010 circular.
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