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No Evidence of Banks Calling in Loans

Updated: Nov 24, 2023



On 15th Nov, in a written reply to a question from a Legislative Council member, Secretary for Financial Services and the Treasury Mr Hui said that the majority of mortgage borrowers are able to continue repayments. The overall mortgage arrears ratio has remained low in recent years, and there is no evidence of banks calling in loans on a large scale.


Hui said that although the number of negative equity mortgage loans increased in the third quarter of this year due to the decline in property prices, the asset quality of bank residential property mortgage loans remains good. The overall mortgage arrears ratio rose slightly from 0.04% at the end of December 2021 to 0.07% at the end of September 2022. The negative equity mortgage arrears ratio was even lower, at 0.02% at the end of September 2022. Both figures are well below previous highs, reflecting that the majority of mortgage borrowers are able to continue repayments.


According to the Hong Kong Monetary Authority (HKMA), banks generally do not require borrowers who can continue to repay their loans on time to make early repayments, even if the value of the mortgaged property falls. As a result, there is no evidence of banks calling in loans on a large scale.


Hui also said that the situation for commercial property mortgage loans is the same as for residential property mortgage loans. Banks generally do not require companies that have obtained commercial property mortgage loans from them to make early repayments if they can continue to repay their loans on time. As for companies that have obtained credit lines with commercial properties as collateral, banks will consider their creditworthiness and repayment ability when reviewing their credit lines on a regular basis. They will not adjust the credit lines solely due to changes in the value of the collateral. If the credit lines are adjusted, the banks will notify the customers in advance and communicate with them to give them sufficient time to prepare.


Hui said that the average mortgage-to-value ratio for newly originated residential mortgage loans in the first half of this year was 59%, and the average debt-to-income ratio for mortgage borrowers was also at a low level of 40%. Both ratios passed the stress test for residential mortgage loans. Even with the recent rise in interest rates and the adjustment in property prices, the borrowers' repayment ability has generally remained good, and there is no evidence of a large-scale default on bank mortgages. The HKMA will continue to monitor market developments closely and take appropriate measures to maintain the stability of the banking system.

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