XN000022-1997-04-09 — Page 50

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Prudent lending criteria ensured

Following is a question by the Hon Lee Wing-tat and a written reply by the Secretary for Financial Services, Mr Rafael Hui, in the Legislative Council today (Wednesday):

Question:

Recently some property developers, when putting up new flats for sale, provide to home buyers a penalty-free mortgage arrangement whereby home buyers will not be required to pay any punitive charges even if they repay the mortgage loan in full within the first year of drawing the loan. In this connection, will the Government inform this Council whether a study has been conducted to examine if such a mortgage arrangement will further fuel property speculation; if so, whether the Government will issue guidelines to property developers and banks requiring them to levy punitive charges on home buyers for early repayment of mortgage loans?

Reply:

We are aware of recent reports of banks offering to waive the charges for early repayment of mortgage loans in connection with the sale of a certain new property development. Although no specific study has been conducted, our view is that this could affect the quality of banks' mortgage assets, regardless of whether there is also a stimulating effect on property speculation.

The punitive charges for early repayment are part of the terms and conditions of a mortgage loan between individual banks and flat buyers. It is therefore not relevant to issue guidelines on this matter to property developers. The Hong Kong Monetary Authority (HKMA) is not aware of any authorized institution actually having reduced or waived charges for early repayment. However, it has taken prompt action to formally advise all authorized institutions of its views on the matter. The HKMA will continue to monitor institutions' mortgage lendings closely to ensure that prudent lending criteria are followed.

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