When the Central Plains City Leading Index CCL hit a new 240-week low (the low of 168.60 points in February 2018), the HKMA issued guidelines to banks today (23rd) to lower the stress test requirements for property mortgage loan interest rates from the current 300 basis points to 200 basis points, the first downward revision since the measure was introduced.
The adjustment applies to all property mortgages with immediate effect.
The HKMA stated that the purpose of the stress test is to ensure that mortgage borrowers have sufficient financial capacity to cope with the repayment pressure caused by rising mortgage rates, so that the risks of banks' mortgage loan business can be properly managed.
When determining the stress test level, the HKMA will make reference to the current interest rate environment and interest rate trends, as well as the historical long-term average level of interest rates.
The bureau continued to point out that considering that the US Federal Reserve has raised the target range of the federal funds rate by a total of 300 basis points since March this year, in the face of rising funding costs, banks have earlier raised the upper limit of interest rate lock-in for newly-created inter-borrowed mortgage loans, and recently they will increase With the increase in the prime lending rate, the HKMA believes that it is appropriate to reduce the rate of increase in the assumed interest rate in the stress test from the current 300 basis points to 200 basis points. This level is sufficient to ensure that the mortgage business risks of banks are properly managed.
The Hong Kong Monetary Authority lowered the interest rate pressure test for property mortgage loans from the current 3% to 2%.
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The HKMA added that although the HKMA has adjusted the low-pressure test requirements, the public should still be aware that mortgage interest rates may rise in line with the overall interest rate environment. The public must carefully assess the interest rates and other financial risks involved before making property purchase, investment and borrowing decisions.
The stress test is a risk monitoring measure by the HKMA for banks, requiring mortgage applicants to simulate a scenario where the current mortgage interest rate increases by 3%, and the ratio of contribution to income should not be higher than 60% of monthly income, so as to ensure that even if the interest rate increases, the borrower During the period, you can afford enough to meet the rising contribution amount.
The latest requirement has been reduced from "plus 3%" to "plus 2%".