HONG KONG (Reuters) – Hong Kong’s de facto central bank said on Friday it eased mortgage stress test requirements for homebuyers in response to rising interest rates and a softening market.
The Hong Kong Monetary Authority (HKMA) said it has notified banks to lower the interest rate stress test requirement from 300 basis points to 200 basis points with immediate effect.
Under the new requirements, the stress test is designed to ensure borrowers have sufficient repayment capacity should interest rates rise by 200 basis points. In a statement, the HKMA said the new level was considered sufficiently prudent in terms of effective risk management in the bank’s property lending business.
Hong Kong banks on Thursday raised the prime lending rate by .5 basis points after the decision. Eric Tso, senior vice president of mReferral Mortgage Brokerage Services, said the rate hike was the first in four years.
“The easing is to support the market.” “This will offset some of the impact of yesterday’s rate hike and allow homebuyers to borrow more.”