HKMA allays fears of rising family debt, principally residence loans
Hong Kong family debt as a share of gross home product has elevated, however the total threat is manageable, stated Edmond Lau, senior govt director of the Hong Kong Financial Authority.
The rise was primarily as a result of financial contraction in Hong Kong since 2019, Lau wrote in a weblog submit at this time.
In 2020, the economic system recorded the most important decline in historical past. Nominal GDP fell 5.4%. Though the tempo of family debt progress moderated to five.5% in 2020 – down from 12.8% in 2019 – declining GDP continued to push the family debt ratio up carefully. by 10 share factors, Lau added.
“Whereas we anticipate the family debt-to-GDP ratio to stay excessive within the close to time period as a result of cyclical and structural components, we consider the general threat of family debt in Hong Kong is manageable,” Lau stated.
It’s fairly regular to see sharp declines in GDP pushing up the family debt-to-GDP ratio. This has been noticed not solely in Hong Kong, but additionally in america, United Kingdom, Japan and different economies, he stated.
Since most loans used to finance residence purchases or investments are pledged with underlying belongings, the credit score threat related to banks is decrease, Lau stated.
The vast majority of family debt in Hong Kong is residential mortgages (68%) and loans for different personal functions (27%), whereas bank card advances are solely a small portion ( 5%).
“In comparison with different international locations in Europe and america, shopper credit score (like bank card advances) is simply a small portion of family debt in Hong Kong. This sort of mortgage is mostly not secured by belongings and will expose banks to greater credit score threat when borrower revenue declines throughout an financial downturn, ”he stated.
HKMA estimates that the full family deposits are thrice the full liabilities. Hong Kong has the very best family equity-to-liability ratio, in comparison with different main economies, such because the UK, US and even Japan, Lau stated.
The HKMA will proceed to make sure that banks cautiously approve mortgage functions and carefully monitor any adjustments within the high quality of their mortgage portfolios, he added.