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Residential Mortgage Default Risk in Hong Kong

In: The Banking Sector in Hong Kong

Author

Listed:
  • Jim Wong
  • Laurence Kang-Por Fung
  • Tom Pak-Wing Fong
  • Angela Sze

Abstract

The sharp fall in property prices following the Asian financial crisis has led many residential mortgage holders in Hong Kong to experience negative equity. At the end of September 2004, there were about 25,400 loans with a market value lower than the outstanding loan amount. The total value of these loans was HK$43 billion. The mortgage delinquency ratio reached a peak of 1.43 per cent in April 2001. While it has improved since the second half of 2001, the delinquency rate in September 2004, at 0.47 per cent, is still higher than 0.29 per cent in June 1998 when data were first collected.1 Given that residential mortgage lending represents a significant component of bank assets, how borrowers’ decisions to default are affected by the negative equity position of their mortgages is of interest to policy makers.2

Suggested Citation

  • Jim Wong & Laurence Kang-Por Fung & Tom Pak-Wing Fong & Angela Sze, 2008. "Residential Mortgage Default Risk in Hong Kong," Palgrave Macmillan Studies in Banking and Financial Institutions, in: Hans Genberg & Cho-Hoi Hui (ed.), The Banking Sector in Hong Kong, chapter 7, pages 132-156, Palgrave Macmillan.
    • Handle: RePEc:pal:pmschp:978-0-230-22737-8_7
    DOI: 10.1057/9780230227378_7
    as

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