On October 16th, the Hong Kong Monetary Authority (HKMA) issued new guidelines to banks regarding the countercyclical macroprudential measures related to property mortgage loans. Under the revised regulations, the maximum mortgage loan-to-value ratio for both residential and non-residential properties will be uniformly set at 70%, while the maximum debt-to-income ratio will be capped at 50%.

The HKMA noted that the residential property market has shown slight improvement since the Hong Kong government announced the removal of demand management measures for residential properties and the HKMA’s revision of mortgage loan regulatory measures in February 2024. However, uncertainties in the external environment persist, particularly regarding the fluctuating pace of interest rate cuts in the United States.

In a statement, the HKMA emphasized that the adjustments to the countercyclical macroprudential measures for property mortgage loans were made in response to market conditions. Their aim is twofold: to ensure that banks manage risks effectively while also minimizing the impact of these measures on the normal property transaction activities of citizens.

These revisions will take immediate effect and apply to property transactions with provisional sale and purchase agreements signed on or after October 16th. Additionally, the new guidelines will also pertain to mortgage applications for pre-sale properties for which provisional agreements were signed earlier but are expected to complete on or after the 16th.

HKMA Chief Executive Eddie Yu stated that the decision to amend the countercyclical measures on property mortgage loans was made in response to market developments. The maximum loan-to-value ratio and the debt-to-income ratio cap have been restored to levels that existed before the countercyclical measures were implemented in 2009. Yu reassured that even with these new measures in place, the banking system in Hong Kong still has ample buffers to tackle the challenges should property prices experience a significant drop.