Hong Kong has lowered the stress test requirement of mortgages for property buyers in response to interest rate rises, its de facto central bank said on Friday.
The country’s banks have been told to lower the stress test requirement from 300 to 200 basis points, the Hong Kong Monetary Authority (HKMA) said.
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The decision came after Hong Kong banks raised their best lending rate by 12.5 basis points on Thursday, the first rate hike in four years.
“The relaxation is for supporting the market,” said Eric Tso, senior vice president of mReferral Mortgage Brokerage Services. “It will offset part of the impact from the interest rate hike and allow homebuyers to borrow more.”
Under the new requirement, the stress test aims to ensure borrowers have sufficient repayment capability if interest rates rise by 200 basis points.
HKMA said in a statement that the new level is considered to be sufficiently prudent in terms of the effective risk management of banks’ property lending business.
- Reuters, with additional editing from Alfie Habershon