Mortgage

Changes In The Residential Mortgage Market After The Removal Of "Spicy Measures" In 2024

• March 2024: Large banks have reportedly stopped issuing "Confirmor" mortgages.
• March 2024: Large banks were said to have drastically reduced cash rebates.
• April 2024: Large banks were said to have drastically reduced cash rebates.
• May 2024: Some banks were said to have temporarily stopped offering mortgages to mainland clients.
• May 2024: Large banks have reportedly tightened commercial property mortgages.
• May 2024: Large banks have reportedly tightened mortgages for older properties and village houses.
• June 2024: Large banks have reportedly tightened mortgages for nano-apartments.
• August 2024: Mortgage insurance companies have relaxed the requirements for qualified owners to rent out self-use properties.
• September 2024: Large banks have reportedly restarted mortgage cash rebates.
• September 2024: HSBC announced a 0.25% cut in its prime rate.
• September 2024: The Hong Kong Mortgage Corporation Limited lowered fixed-rate mortgage rates by 0.25%.
• September–October 2024: Multiple banks launched fixed-rate mortgage plans ranging from 2 to 5 years.
• October 2024: The Policy Address announced four new mortgage-related measures.*
• November 2024: HSBC announced a further 0.25% cut in its prime rate.
• December 2024: The Hong Kong Monetary Authority relaxed the maximum loan-to-value (LTV) ratio and the cap on the Debt Servicing Ratio (DSR) for uncompleted flats.**
• December 2024: HSBC cut its prime rate by another 0.125%.
• January 2025: Several banks withdrew their 2–5 year fixed-rate mortgage plans.
• January 2025: Major banks have reportedly resumed offering cash rebates for "completed property title" and refinancing mortgages.
• February 2025: HSBC launched new 3-year and 5-year fixed-rate mortgage plans.
• February 2025: The Government announced in its Budget a revision to the stamp duty brackets for property transactions.***

Notes:

*
(1) A unified 70% maximum LTV ratio for all residential properties, regardless of value or whether they are owner-occupied.
(2) For asset-based mortgage applications, the maximum LTV ratio was raised from 60% to 70%, aligning with income-based mortgage applications. This applies to both residential and non-residential properties (including offices, shops, and industrial units).
(3) The DSR cap for non-owner-occupied properties was increased from 40% to 50%, aligning it with the cap for owner-occupied properties.
(4) The requirement to lower the applicable LTV and DSR caps by 10% when the borrower has provided guarantees or loans for other mortgage properties was removed.

** Banks may now offer up to 80% LTV and raise the DSR cap to 60% for eligible uncompleted owner-occupied residential units purchased under construction-period payment plans, provided provisional sale and purchase agreements were signed between 1 January 2021 and 31 December 2023.

*** The threshold for the $100 fixed-rate Ad Valorem Stamp Duty was raised from properties valued at HK$3 million or below to those at HK$4 million or below.

 

Trends In Hong Kong Residential Mortgages After The Removal Of The "Spicy Measure"

In February 2024, the Government relaxed mortgage loan-to-value ratios, removed all "spicy measures" and suspended the stress test requirements. The loan-to-value ratio for self-use residential properties priced at HKD 30 million or below was adjusted to 70%, and for properties priced above HKD 35 million, the maximum ratio was set at 60%. Non-self-use residential properties saw an increase in the loan-to-value ratio from 50% to 60%. Mortgages for non-residential properties, including offices, shops, and industrial buildings, had their loan-to-value ratio increased from 60% to 70%.

Property transactions surge after "Spicy Measures" are removed; Backlog of mortgage approvals

Unexpectedly, the volume of transaction of first- and second-hand units rebounded sharply from an extremely low level after the removal of "Spicy Measures". In March, the transaction of first-hand properties increased by about 18 times and second-hand flats more than doubled. As a result, the number of mortgage applications drastically increased within a short period of time. Banks were unable to handle the sudden surge in mortgage applications, causing a "gridlock" situation in the first half of the year.

Local users had dominated the property market before the removal of the "Spicy Measures". After that, the customer base has expanded widely. New customers include people from mainland China and overseas, properties owners who want to buy more, property investors and corporate clients. Banks have to re-assess and re-evaluate the cases and the required supporting documents. The time for an approval of the relevant mortgage has been lengthened.

Mortgage intermediaries pointed out that the approval time varied depending on the manpower of banks and the complexities of cases. But generally, many mortgage applications took 1 to 1.5 months or longer to process, compared to the previous 2 to 4 weeks. Some cases requiring mortgage insurance took up to 2.5 to 3 months for approval.

Since May 2023, Hong Kong's one-month HIBOR has remained above the ceiling interest rate for most bank H mortgage plans, and the six-month HIBOR continues to hover above 4%. Due to high HIBOR rates and the property market downturn, banks gradually reduced cash rebates and tightened mortgage terms. The level of aggressiveness varied among different clients and property types. For example, some banks temporarily stopped accepting mortgage applications for village houses, tenement houses, and very old properties.

In August 2024, mortgage insurance companies announced a new arrangement for mortgage insurance plans, considering individual cases for approval to allow qualified owners to rent out self-use properties to help them address special needs arising from changes in their personal or family situations. The HKMA also announced the establishment of a Taskforce on SME Lending to assist SMEs with financing and mortgage loan issues, promising to reply with approval results within two weeks once clients have provided all the necessary documents.

The industry generally welcomed the move, saying it would shorten the mortgage approval process, allow buyers to quickly know the approval results and make early preparations. Even if the mortgage conditions approved by the bank are less than ideal, or that the mortgage is rejected, buyers can promptly submit an application to another bank.

Rate-cut cycle begins; Banks relaunch cash rebates to lure customers

In early September, the outlook of Hong Kong's property market grew positive as the U.S. was expected to enter an interest rate cut cycle. Local banks stepped up efforts to attract customers before the fiscal year-end. At the same time, a decline in HIBOR (Hong Kong Interbank Offered Rate) lowered banks' funding costs, prompting major institutions to reintroduce mortgage cash rebates, ranging from 0.1% to 0.25%, to grab a bigger share of the market.

The local interest rate environment changed rapidly after September. In mid-September, the U.S. Federal Reserve officially announced a rate cut, followed by Hong Kong banks including HSBC, which lowered its prime rate by 25 basis points (bps). HSBC further cut rates by 25 bps in November and 12.5 bps in December, bringing the total rate cut to 62.5 bps, exceeding market expectations. During the same period, the Hong Kong Mortgage Corporation also cut its fixed-rate mortgage rate by 25 bps.

Policy relaxation stimulates market demand

Alongside interest rate cuts, policy easing also played a key role. In mid-October, the Policy Address introduced four major mortgage-related policy adjustments, including a unified 70% loan-to-value (LTV) cap across all property types—providing a positive boost to the housing market (see appendix for full details). In December, the Hong Kong Monetary Authority (HKMA) further relaxed LTV and debt servicing ratio (DSR) limits for unfinished ("pre-sale") properties. The industry generally welcomed these timely changes, especially for buyers who had opted for "construction-period payment" options and were struggling to secure financing amid falling prices. The relaxed DSR threshold also helped more buyers pass income assessments.

By February 2025, more policy changes were introduced. The Budget announced a revision to the property stamp duty brackets, aimed at easing the tax burden for first-time buyers and those upgrading their homes. Specifically, the threshold for the fixed-rate ad valorem stamp duty of HK$100 was raised from properties valued at HK$3 million or below to HK$4 million or below. This measure was designed to stimulate market sentiment and boost transaction activity in the housing sector.

Rate-cut cycle paused in Q1 2025

From January to April 2025, the reduction of local interest rates came to a halt as the US kept interest rates unchanged. But during the six-month period between September 2024 and April, many banks had already introduced competitive fixed-rate mortgage products to attract borrowers and hedge against future rate fluctuations.

Meanwhile, it was reported in early January 2025 that some major banks had resumed offering cash rebates on "completed title" properties and refinancing deals, with rates up to 0.28%. For new mortgages, rebate rates also increased—from a previous high of 0.2% to 0.33%. The industry expects banks to maintain an aggressive stance on mortgage lending throughout the first half of the year, providing positive support to the housing and financing markets.

It is important to note that the mortgage and interest rate outlook will be uncertain in view of the frequent changes in the US government policies and the impacts on the American and global economy caused by the tariff war. Nevertheless, the latest U.S. Consumer Price Index (CPI) in March showed a year-on-year rise of 2.4% with core CPI standing 2.8%. Both were below market expectations. The unemployment rate also showed a slight increase. The Federal Reserve is likely to closely monitor inflation trends, employment conditions, and tariff impacts. If inflation continues to ease and unemployment rises, the industry anticipates a possible rate cut by mid-2025 or later.

 

SME business environment weakens in 2024

In Hong Kong, small and medium-sized enterprises (SMEs) are defined as manufacturing companies with fewer than 100 employees and non-manufacturing companies with fewer than 50 employees. According to statistics from the Hong Kong Government's Trade and Industry Department, as of March 2024, there were more than 360,000 SMEs in Hong Kong, accounting for over 98% of the total commercial units in the city. These SMEs provided employment opportunities for over 1.2 million people, making up more than 44% of the total employment in Hong Kong (excluding civil servants).

Among the various industries in which SMEs operate, the majority are engaged in import-export trade and wholesale businesses, followed by professional and commercial services. The number of these two types of SMEs accounts for over 42% of all SMEs in Hong Kong, and the total number of employees in these sectors makes up more than 42% of the SME workforce.

On September 10, 2024, the Government released the "Monthly Survey on Business Situation of Small and Medium-sized Enterprises for August 2024". A government spokesperson noted that the overall business atmosphere for SMEs had slightly weakened in August, although conditions varied across different industries. The spokesperson acknowledged that the business environment would continue to be affected by various external uncertainties. However, they also stated that the central government's measures to support Hong Kong and the continued growth of the local economy should provide support. The Government will closely monitor the situation.

According to the survey, the current business conditions index for SMEs' business revenue dropped from 41.8 in July 2024 (in the contraction zone) to 41.3 in August 2024. The survey collects opinions from a fixed sample of about 600 SMEs each month, providing quick reference to the short-term business conditions of SMEs. An index above 50 indicates that business conditions are generally improving, while an index below 50 indicates the opposite.

According to industry analysis, the current business revenue index for some industries covered by the survey dropped in August 2024 compared to the previous month, particularly in logistics (from 40.3 to 35.9) and import-export trade (from 45.1 to 42.3). On the other hand, the current business revenue index for the food and beverage, retail, and commercial service sectors increased in August 2024 compared to the previous month. The current trend index for new orders in the import-export trade industry also dropped from 44.8 in July 2024 to 43.4 in August 2024.

 

HKMA Introduced 9 Measures To Support SMEs

On March 28, 2024, the Hong Kong Monetary Authority (HKMA), in collaboration with the "The Banking Sector SME Lending Coordination Mechanism" (Mechanism), announced the introduction of nine measures as below to support SMEs in obtaining bank financing. These measures aim to assist SMEs in navigating the complex and changing business environment and enhance their bargaining power with banks:

- Support SME Financing Needs -

1. Mortgage clients who make their payment on schedule will not be required to pay back early. Banks in the Coordination Mechanism have pledged, in line with the HKMA's guidlines issued on December 20, 2023, not to require those mortgage clients to make early repayments.
2. Adjust credit limits with a minimum six-month transition period. Banks, when regularly reviewing credit limits, will consider factors such as the borrower's credit needs, overall financial situation, and repayment ability. Banks will not simply adjust limits due to changes in collateral value. If a reduction in credit limit is necessary due to changes in the client's needs or risk situation, banks will provide a minimum six-month transition period for clients to gradually adapt to the new credit limit, as long as they are making normal repayments and have not violated loan terms.
3. Expedite the processing of 80% and 90% credit guarantee product applications. In his 2024-2025 Budget, the Financial Secretary announced an extension of the application period for the "SME Financing Guarantee Scheme" for 80% and 90% guarantee products by two years until the end of March 2026. Banks will cooperate with the Hong Kong Mortgage Corporation to actively review processing procedures with an aim of speeding up loan approvals.
4. Support clients facing difficulties based on the "interest-only" repayment plan. For the SMEs facing operational difficulties, banks will adopt an inclusive approach and provide appropriate credit support, including loan restructuring based on the "interest-only" plan to alleviate the financial pressure on clients. For businesses already in the "interest-only" plan who are transitioning to partial principal repayment, banks will consider extending the period for partial repayment, offer options for lower principal repayment or continue with the "interest-only" arrangements. These arrangements also apply to personal loans for taxis, minibuses, and commercial vehicles.
5. Provide credit products and other support services tailored to the needs of SMEs. Banks will use financial technology, including the HKMA's "Commercial Data Interchange" (CDI), to actively develop customised credit products for SMEs, including fast-track unsecured loans. In addition to credit products, banks will provide other services to support SME business development, such as cross-border banking services, commercial digital services, e-commerce applications, and Environmental, Social, and Governance (ESG) related services, to help SMEs expand their business scope and strive for upgrading and transformation.
6. Consider interest and fee reductions. Banks will improve the transparency of SME banking service fees. For SMEs in need, banks will consider providing fee waivers, interest reductions, or other discounts to alleviate their financial burdens.

- Enhance SMEs' Bargaining Power -

7. Establish a one-stop platform to provide SME banking service information. The HKMA will establish a dedicated SME financing page on its website, listing SME loan information from different banks, including service hotlines, types of credit products, etc., to help SMEs compare and choose between banks. Additionally, the HKMA will launch a dedicated email and hotline to collect and forward SMEs' feedback on banking services.
8. Facilitate customer transfers between loan banks. If an SME wishes to switch banks, the banks have pledged to provide assistance. The original loan bank will transfer the customer's account information to the new loan bank under the HKMA's "Interbank Account Data Sharing" (IADS) program, with the customer's consent. Furthermore, the original bank will provide the customer's existing credit information within seven working days to enable the new loan bank to expedite account opening and loan application approvals. For property-secured loans, except in special circumstances, the original bank will aim to release the mortgage on the property within six weeks of receiving the relevant legal instructions.

- Strengthen Communication -

9. Regular meetings between the banking industry and business organizations to understand SME needs. The Hong Kong Association of Banks and the Hong Kong Chinese Banks' Association will lead regular meetings between banks and business organizations to better understand the needs of SMEs, continuously optimising banking services and strengthening support for SMEs. For this purpose, the Hong Kong Association of Banks and the Hong Kong Chinese Banks' Association will regularly communicate the progress of the work with the HKMA.

 

Difficulties In SME Financing

Due to the downward adjustment of property prices and high interest rates, words spread in the market in mid-2024 that SMEs were being subjected to "Call Loans." According to media reports, Poon Tat-hang, Chairman of the Hong Kong Real Estate Agents Association, said that an SME owner had mortgaged a commercial property in Kowloon with a 50% loan-to-value ratio a few years ago. It was bought at a price of HKD 60 million. Based on the current valuation, it has dropped to HKD 30 million. Although the owner has been making regular repayments, the bank is now demanding a repayment of the remaining HKD 10 million difference. If the owner fails to do so, the bank will raise the interest rate. The owner will face a huge challenge in their operation. There are more than a dozen similar cases.

In addition to "Call Loans", some SMEs are also facing "Cut Loans". According to media reports, Lee Cheuk-bin, President of the Hong Kong Small and Medium Enterprises Association, stated that an SME owner in the building materials sector suddenly received a notification from the bank, informing him that his original credit limit of over HKD 10 million had been reduced by 30%. The "million-mark cut" posed enormous capital pressure on his newly signed contracts, dealing a serious blow to their business development.

 

Establishment Of The "Taskforce on SME Lending"

On August 23, 2024, the Hong Kong Monetary Authority (HKMA) met with the CEOs of the three largest banks in Hong Kong. They included Ms. Huen Wai-yi, CEO of Standard Chartered Bank (Hong Kong) and Greater China & North Asia; Ms. Lim Hui-hung, Chairman of the Hong Kong Association of Banks and CEO of HSBC Hong Kong; and Mr. Sun Yu, Vice Chairman and Chief Executive of Bank of China (Hong Kong).

They discussed the issue of financing for SMEs and property mortgage loans. The HKMA and the Hong Kong Association of Banks jointly established a "Taskforce on SME Lending" to further promote relevant work at both the case and industry levels.

For those SMEs that may be facing financial difficulties, HKMA Chief Executive Mr. Eddie Yue said a mechanism will be established to review each case and refer it to the relevant bank's specialist team for prompt handling. If common issues are found among those cases, the task force will discuss appropriate measures for all banks to adopt.

The "Taskforce on SME Lending" will also strengthen communication between the HKMA, the banking sector, and the business community to better understand the financing needs of SMEs in a timely manner and provide better support for their business development and upgrading. The HKMA will also continue to monitor how banks support SMEs' business strategies during its regulatory process.

The HKMA pointed out that after the pandemic, local economic activities have gradually returned to normal. But due to uncertainties in the external and local economic environment, the HKMA understands that some SMEs are still facing challenges. In response, the HKMA introduced a set of nine measures supporting SMEs in March 2025. They included measures, under which banks will not require early repayment from mortgage customers who are unable to repay on time and that banks will not adjust credit limits solely based on changes in the value of collateral. Even in cases where adjustments are necessary, customers will be given a minimum of six months' transition time. In the four months since the introduction of these nine measures, nearly 14,000 SMEs have benefited, with total credit facilities exceeding HKD 31 billion.

After the meeting, the three banks reaffirmed that they have not changed their risk appetite for SME financing, nor have they altered their credit approval standards. They will continue to implement the nine measures introduced earlier. However, the HKMA also pointed out that banks need to maintain effective risk management while ensuring the protection of depositors. After providing grace periods or restructuring, if individual loans are still overdue, banks will inevitably need to address these situations. But they will do so with an understanding attitude toward their customers.

Regarding property mortgage loans, the main discussion during the meeting was about how banks can improve the transparency, efficiency, and customer experience of their approval processes, such as committing to notify customers of loan approval results within a reasonable time after receiving all the required application documents. Further discussions and initiatives will be pursued through the task force at the industry level.

On the day of the meeting, the HKMA secured commitments from six banks, including the three note-issuing banks (HSBC, Standard Chartered, and Bank of China Hong Kong), as well as Bank of East Asia, Hang Seng Bank, and ICBC Asia. These banks, which together account for more than 80% of the mortgage loan market share, will respond to customers with loan approval results within two weeks once all necessary documents are submitted.

 

Updates On The "Taskforce on SME Lending"

In early September, the Hong Kong Monetary Authority (HKMA) reported that HKMA and banks had received more than 70 inquiries and cases from various industries through multiple channels since the setting up of the SME Lending task force. Of them, over 20% were general inquiries or feedback related to SME loans and mortgages. After receiving the information provided by the HKMA, the inquirers did not seek further assistance. Among the remaining cases that required follow-up, approximately 70% were related to SME financing, while 30% involved property mortgage loans.

About 60% were related to issues in the bank's handling of customer financing and loan applications, such as unclear communication with customers or failure to appropriately address customer and potential customer requests and feedback, as well as prolonged loan approval times.

The remaining nearly 40% of follow-up cases stemmed from gaps between the customers' expectations and the arrangements that banks could offer under prudent risk management principles. For instance, applicants' credit conditions (e.g., persistent loan defaults) or property-related issues (e.g., ownership problems) did not meet the bank's risk management requirements. As banks need to maintain consistent and effective risk management while protecting depositors, loans could not be approved or relief measures offered as per customers' wishes.

The HKMA has required banks to adopt an accommodating attitude to forge communication with their customers, treat them fairly and make business arrangements for them in a transparent, reasonable and highly-efficient way. The HKMA and the banking industry will provide SME loan and mortgage-related information in a timely manner, and will continue to communicate closely with the business community in order to reduce the gap between their expectations and the execution of their loan applications.

On August 29, the HKMA completed the follow-up work with the relevant banks after they received 10 property mortgage-related cases referred by the Hong Kong Real Estate Agencies General Association. Of these cases, six were related to the execution of customer requests or communication issues between the bank and the customer. After considering additional information, these cases were approved for loans. The remaining four cases could not fully meet customer loan requirements due to the bank's need to maintain effective risk management.

The Taskforce on SME Lending held its first meeting in early September 2024. The participating banks confirmed that they would continue to implement the nine measures introduced earlier to support the ongoing development of SMEs by providing necessary financing and support. In terms of risk appetite, the participating banks confirmed that there were no changes to their risk appetite for SME financing or credit approval standards. The meeting also discussed the importance of inclusive and fair treatment of customers.

Regarding manpower and resources, the participating banks committed to allocating sufficient resources. In general, banks aim to complete the "credit approval review arrangement" cases and respond to customers within one month, maintaining communication with customers in an inclusive manner throughout the process.

For residential property mortgage loan approval processes, 14 banks attended the meeting. They included HSBC, Standard Chartered, Bank of China Hong Kong, Bank of East Asia, Hang Seng Bank, ICBC Asia, China Construction Bank (Asia), Bank of Communications (Hong Kong), China CITIC Bank International, Citibank, Dah Sing Bank, DBS Bank (Hong Kong), OCBC Bank (Hong Kong), and PAO Bank. These banks pledged to notify customers of loan approval results within 14 days after receiving all application documents, aiming to enhance the transparency, efficiency, and customer experience of residential mortgage loan approval processes and allow customers sufficient time to make appropriate arrangements. The HKMA also reminded banks to improve transparency and explain their loan decisions to customers clearly.

The task force agreed that banks need to maintain consistent and effective risk management while ensuring the protection of depositors. Therefore, if individual loans still show overdue conditions after grace periods or restructuring, banks will inevitably need to address these situations but will ensure communication with customers in an inclusive manner.