Hong Kong extends pilot fixed-rate mortgages scheme by a year, lowers interest rates to combat pandemic fallout
- Application period for Fixed-rate Mortgage Pilot Scheme extended until October 30, 2021
- HKMC obtains agreement from monetary authority that it will not stress test applicants
The Hong Kong Mortgage Corporation (HKMC) has extended a pilot scheme for fixed-rate mortgages by a year, and said interest rates will also be lowered further, as the city faces rising unemployment and a recession amid the coronavirus pandemic.
The application period for the Fixed-rate Mortgage Pilot Scheme has been extended until October 30, 2021. The scheme started receiving applications from Monday.
This comes as the pandemic continues to adversely affect the local job market. The Hong Kong government recently said the city’s unemployment rate had almost hit a record 16-year high. Moreover, in the latest quarter, new cases of negative equity – when a home loan exceeds the market value of the property involved – increased by about 60 per cent quarter on quarter.
“The Fixed-rate Mortgage Pilot Scheme aims to provide an alternative financing option to homebuyers for mitigating their risks arising from interest rate volatility, thereby, enhancing banking stability in the long run,” HKMC said in a statement.
The interest rates charged have also been reduced from when the scheme was first introduced in the Budget on February 26. For instance, the rate for the 10-year fixed-rate period declined from 2.75 per cent to 2.55 per cent to 1.99 per cent, eventually.
At 1.99 per cent, the rate is only 0.17 percentage points higher than Monday’s actual mortgage rate of 1.82 per cent linked to the Hibor, or the Hong Kong Inter-bank Offered Rate, helping homeowners lock in a low rate, mReferral Mortgage Brokerage Services said.