Private developers' schemes
The Government and public housing organisations are not alone in helping first-time home buyers to purchase their own homes. Private developers too have been offering a variety of supplementary financing schemes to boost the marketability of their flats.
Mortgage ceiling
Some members have called on the Government to encourage banks to provide preferential mortgage loans at more than 70% of property value. Our view is that several schemes to promote home ownership are already in existence for those who are in genuine need of help, that is to say, the low and middle income groups. While trying to help first-time home buyers to buy their own homes, we need to be conscious of another equally important objective, that of preserving the stability of the banking system which is the backbone of our economy. Any problem which puts pressure on its health would threaten to destabilise other sectors of the economy, and have effect on the population at large.
There are good reasons why banks maintain a prudent lending policy and refrain from increasing the lending limit. First, the mortgage ceiling provides banks with a prudent margin of comfort against any erosion of the security for their mortgage loans owing to fluctuations in property prices. The banking sector's exposure to property loans has, I understand, already reached about 40% of total loans for use in Hong Kong. This is a high figure. Second, there are a number of uncertain factors: the rising interest rates in the United States; the possibility of a trade dispute between China and the United States; the macro economic adjustment still underway in China; the consolidation which has been taking place in the local property market, and so on. All these factors underline the need to maintain prudence in the banking sector, which is in turn essential for the financial stability of Hong Kong. Lending decisions are commercial decisions, and clearly the banking sector will need to take careful decisions on their own. The Government cannot and will not encourage banks to take higher risks than necessary. Nor can a government guarantee any risks above the 70% mortgage for a special class of people whose income earnings are already above the income cut-off level of $44,000 per month for the sandwich class. Such preferential treatment is not justified.