XN000022-1993-03-03 — Page 9

WEDNESDAY, MARCH 3, 1993

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MORTGAGE LOAN RATIO TO STAY

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THE GOVERNMENT STRONGLY BELIEVES THAT BANKS SHOULD CONTINUE CAUTIOUS IN THEIR RESIDENTIAL MORTGAGE LENDING ACTIVITIES AND THE 70 PER CENT LOAN-TO-VALUATION RATIO SHOULD BE KEPT INTACT.

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THIS

WAS

STATED BY THE SECRETARY FOR MONETARY AFFAIRS, MR MICHAEL CARTLAND, IN A WRITTEN REPLY TO A QUESTION BY THE HON DAVID LI AT THE LEGISLATIVE COUNCIL TODAY (WEDNESDAY).

ASSURING THE COUNCIL THAT THE SITUATION WOULD BE KEPT UNDER CONSTANT MONITORING AND REVIEW, THE SECRETARY SAID RELAXATION SHOULD BE CONSIDERED ONLY WHEN THERE COULD BE SOME CONFIDENCE THAT THIS WOULD NOT LEAD TO A FRESH ROUND OF SPECULATION.

"MOREOVER, IT CAN BE SAFELY ASSUMED THAT RELAXATION IN FUTURE, IF ANY, WILL BE CAUTIOUSLY CONTROLLED AND WILL AIM ONLY AT HELPING GENUINE END-USERS, AND FIRST-TIME BUYERS IN PARTICULAR, HE SAID.

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THE 70 PER CENT LOAN RATE GUIDELINE WAS VOLUNTARILY ADOPTED BY THE BANKING INDUSTRY IN NOVEMBER 1991, IN THE WAKE OF EXCESSIVE SPECULATIVE ACTIVITY AND FOR THE PURPOSE OF SAFEGUARDING THE BANKS

OWN INTERESTS.

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MR CARTLAND SAID THE GOVERNMENT WELCOMED THIS MEASURE AND HAD SINCE BEEN URGING ALL AUTHORISED INSTITUTIONS TO ADHERE ΤΟ THE GUIDELINE.

"WE WILL CONTINUE TO ENCOURAGE BANKS TO TAKE A CAUTIOUS STAND WITH REGARD TO RESIDENTIAL MORTGAGES."

**THE GUIDELINE HAS EVIDENTLY BEEN SUCCESSFUL. THE MARKET HAS BEEN COOLING DOWN IN THE PAST SIX MONTHS. TRANSACTION VOLUME HAS SHRUNK. PRICES HAVE CORRECTED HEALTHILY. EXCESSIVE SPECULATION BEEN CURBED, HE SAID.

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HOWEVER, DESPITE THE SLOWING DOWN, BANK MORTGAGE LENDING CONTINUED TO EXPAND AND INDEED HAS SLIGHTLY INCREASED ITS SHARE TOTAL LOANS FOR USE IN HONG KONG LAST YEAR, HE SAID.

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OF

PROPERTY PRICES IN JANUARY THIS YEAR WERE STILL SOME 14 CENT HIGHER THAN IN NOVEMBER 1991, HE ADDED.

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MR CARTLAND SAID THE MARKET WAS VERY DIFFICULT TO READ AT

THE

MOMENT.

"ITS CURRENT STATE MAY WELL ALSO OWE SOMETHING TO THE POLITICAL SITUATION AND TO SEASONAL FACTORS.

"GIVEN THAT INTEREST RATES ARE STILL AT LOW LEVELS IN COMPARISON WITH CURRENT INFLATION, ANOTHER OUTBURST OF SPECULATIVE ACTIVITY ON RELAXATION OF THE GUIDELINE CANNOT BE RULED OUT, PARTICULARLY IF THE POLITICAL SITUATION IMPROVES OR BECOMES LESS OF FACTOR IN PEOPLE'S MINDS, HE SAID.

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MR CARTLAND SAID IT WAS IMPORTANT THAT THE POSITIVE EFFECTS OF THE MEASURE WERE NOT EASILY THROWN AWAY BY PREMATURE RELAXATION.

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