Hong Kong to ease key mortgage insurance rule to help families cope with financial stress

Hong Kong, through its mortgage insurance programme company, is relaxing one of its key rules to help the city’s residents overcome short-term financial stress or ease family-related circumstances by allowing them to rent out their homes for income.

HKMC Insurance, which is owned by government-backed Hong Kong Mortgage Corporation, will make those exceptions from August 8 on merit, according to a statement on Friday. Homeowners may apply for a waiver from the “owner-occupied” rule through a bank, subject to conditions, it added.

At present, homeowners who obtained mortgage loans from HKMC Insurance must be end users and are not permitted to let the property to another party. The insurance scheme finances up to 95 per cent of the home’s value, compared with 50 per cent to 70 per cent under market terms.

“The new arrangement aims to assist those with special needs,” HKMC Insurance said in the statement, stressing that the owner-occupancy requirement “remains a key eligibility criterion” under its insurance programme.

While the olive branch is seen as helping people cope with family situations such as employment loss or the arrival of new babies, it also reflects the government’s effort to alleviate the pain from a multi-year industry slump, according to Eric Tso Tak-ming, chief vice- president of mortgage broker mReferral in Hong Kong.

Home prices have weakened more than 20 per cent from their peak over the past five years, according to government data. Buyers who entered the market from 2020 to 2022 with financing from HKMC Insurance are probably struggling with negative equity, Tso said, referring to the situation when the value of the underlying property falls below the mortgage balance.

For these borrowers, “it is very difficult for them to sell their existing flats for a new one because the value they can get from the sale would not be enough to repay the outstanding mortgage loan”, he said. The new measure will help new parents or those in financial dilemmas, he added.

To be eligible, home owners must fulfil certain conditions imposed by HKMC Insurance. They must not own other residential property in the city, according to the statement. Once approved, they must primarily reside in Hong Kong, and they and their spouses or cohabitants are not allowed to buy another home in the city.

HKMC Insurance said it will take action against any homeowners under its programme who are found renting out their properties without prior approval.