TNAG-0913-FCO40-1123-Policy-on-housing-and-resettlement-in-Hong-Kong-1979 — Page 35

CONFIDENTIAL

For discussion

on 6th November 1979

CC)100 Copy No Page 1

for your infomation MEMORANDUM FOR EXECUTIVE COUNCIL

30110

HOME OWNERSHIP SCHEME SUPPLY OF MORTGAGE FINANCE

31.

:

120

of 80

Kk360/2

HKK

On 15th February 1977, after having considered memorandum XCC(77)8, Members advised and the Governor ordered that the Working" Party on Home Ownership should negotiate with the Hongkong & Shanghai Banking Corporation, the Hang Seng Bank Limited and other commercial banks and financial institutions with a view to arranging an adequate amount of mortgage finance for approved purchasers under the Home Ownership Scheme ("HOS"), on terms that would satisfy the following guidelines:

(a)

(b)

(c)

the amount of loan; up to 90% of the sale price of each flat;

repayment period: 15 years;

interest rate: to be set for periods of three, five or seven years at 8% to 9% per annum, subject to periodic review and to any arrangement which would minimise the risk to the mortgagor of interest rate fluctuations.

2

With this remit, the Working Party on Home Ownership under- took negotiations with four major banks in Hong Kong: the Hongkong & Shanghai Banking Corporation, the Chartered Bank, the Hang Seng Bank and the Bank of East Asia. The outcome of the negotiation was the decision to invite banks and other financial institutions to participate in the scheme by committing funds and making loans to purchasers of flats in the scheme. The standard terms for the mortgages are :

(a)

(b)

(c)

the amount of loan: up to 90% of the sale price of the flats;

repayment period: 15 years;

interest rate; to be calculated on a formula combining best lending rate and standard mortgage rate, but subject to a minimum of 7% p. a. and a maximum of 9% p. a. The rate to be fixed for 5 years at a time.

G.S. 166

3

In June 1978, all banks and deposit-taking companies were invited to participate in the scheme. Although 18 banks and 26 deposit- taking companies showed interest, only 10 banks and 5 deposit-taking companies have actually agreed to commit funds to the scheme to a total of $1,496.5 million. Of this amount $1,380 million is coming from the 4 institutions, originally annroached.

CONFIDENTIAL

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