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(London.CityRegions.com, April 21, 2013 ) Crawley, UK -- According to the latest reports coming from China, the Hong Kong Mortgage Corporation may be readying to further tighten eligibility for its payment protection insurance on home loans. The move seems to be based upon the recent rising of interest rates in the region.
When home buyers take out a loan worth more than the standard of 70% value on a given property, the corporation insures said portion of loan exceeding the threshold.
Within March it was announced that it would offer its maximum protection only for loans on loans that are HK$4 million or less, which is down from the previous ceiling of HK$6 million.
In a new television interview, Raymond Li Ling-cheung, who is the CEO of the corporation, was unable to rule out further measures if it was deemed necessary by the administrators of the corporation.
When asked on the value threshold and whether or not it would lower again in light of market risks, Li stated; "We are watching and it is possible that we will adjust the cap at any time."
The corporation is the largest provider of mortgage protection insurance within Hong Kong, and under its current insurance scheme, a buyer can put a deposit of as little as 10% rather than 30% required by the Monetary Authority. When a mortgage falls into default, the insurance compensates the lenders for the loss.
In March, the government doubled stamp duties for homes and all non-residential properties that were valued above the HK$2 million threshold Li stated that applicants for its Mortgage Insurance Protection Scheme had simply dropped as sentiment in the market fell.
"This month, we receive only about 40 applications a day, which is half of what we had in previous months," he said.
Li also made a point to state that corporation was considering a fixed-interest-rate arrangement to make its reserve mortgage program for the elderly.
The current scheme has not received a rousing response, with less than 350 applications being levied since the move was launched in 2011. The scheme allows for older individuals to use their house as collateral in return for fixed-sum payable income each month for the remainder of one's life.
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