Hong Kong hits banks for providing loans to mortgage firms

Says this will undermine property curbs.

The Hong Kong Monetary Authority said it does not encourage banks to provide loans to finance companies. It argued that banks’ support for mortgage lending by finance companies will reduce the effectiveness of its home-lending controls.

It noted that if banks provide loans to finance companies to support their mortgage business and these finance companies do not follow its guidelines on property mortgage lending, this may undermine the effectiveness of the prudential measures.

HKMA asked lenders for information on financing provided to companies that offer mortgages.

In February, Hong Kong doubled the stamp duty on all property transactions higher than US257,800 and HKMA tightened mortgage terms for commercial properties and parking spaces.

The regulator also required banks to lower the maximum mortgage loan-to-value ratio on commercial properties by 10 percentage points. It limited the maximum mortgage for parking spaces to 40 percent of the value, with a 15 year-cap on the length of the loan.

Property transactions in the city plunged to a two-decade low in the second quarter as the measures took effect.