Gov’t issues guidelines to banks on mortgage loan changes

It made adjustments whilst maintaining bank stability and proper risk management.

The Monetary Authority announced a set of mortgage loan adjustments that would strike a balance between retaining bank stability and risk management.

Monetary Authority Chief Executive Eddie Yue said there will be changes to “maximum loan-to-value (LTV) ratios for self-occupied residential properties.” 

“For properties with a value of $15m or less, the maximum LTV ratio will be raised to 70%. For properties with a value of more than $15m and up to $30m, the maximum ratio will be increased to 60%. For those with a value above $30m, meanwhile, it will remain unchanged at 50%,” read the statement.

To avoid a sudden drop in applicable LTV ratios, the ratios for properties in certain value ranges will adjust gradually. The maximum LTV ratio for non-self-use residential properties stays at 50%.

The next adjustment increases the maximum LTV ratio for non-residential properties from 50% to 60%.

The third adjustment raises the maximum LTV ratio for mortgage loans assessed on the basis of borrowers’ net worth from 40% to 50%. It is applicable to both residential and non-residential properties.

The mortgage loan changes will take effect immediately, and apply to property transactions with provisional sales, and purchase agreements signed today or subsequently. 

Yue said this was the first time the authority had eased the countercyclical macroprudential measures for residential properties since it was implemented in 2009.

He also reminded prospective buyers to carefully evaluate their affordability when buying a property and prudently manage the financial risks involved.