The HKMA announced a relaxation of the mortgage stress test last week after a number of banks raised their prime rate by 1/8%. The market understands it as reducing spicy food and supporting the market. How much stimulation will the relaxation of the pressure test have on the market outlook?
Assuming the current interest rate is 2.7% and the repayment period is 30 years, the comparison before and after the relaxation of the stress test is as follows:
Before relaxing stress test
Stress test conditions: “Current interest rate +3%, monthly repayment not exceeding 60% of monthly income”Borrowing 5 million yuan for the mortgage, the monthly payment is 20,280 yuan, the monthly income requirement for passing the stress test: 48,367 yuan, the monthly payment accounts for 42% of the monthly income
Per 10,000 yuan monthly mortgage loan cap: 1,033,769 yuan
After relaxing the pressure test
Stress test conditions: “Current interest rate +2%, monthly repayment not exceeding 60% of monthly income”Borrowing 5 million yuan for a building mortgage, the monthly payment is 20,280 yuan, the monthly income requirement for passing the stress test: 43,220 yuan, the monthly payment accounts for 47% of the monthly income
Per 10,000 yuan monthly mortgage loan cap: 1,156,876 yuan (about 12% higher than before the relaxation)
(Assuming that the mortgage applicant has no other mortgage burdens and no other debts)
After the bank raises the prime interest rate, in addition to increasing the monthly payment of borrowers with floating-rate mortgages (including P mortgages and H mortgages), it will also increase the monthly income requirements for newly approved mortgages to pass the stress test. After the bank added P, the HKMA relaxed the stress test, which was interpreted by the market as a support for the market, because the relaxation would offset part of the impact of adding P on the stress test. After the relaxation, for the same amount of mortgages, the income requirement for passing the stress test dropped by about 10.6%; or, under the same income, the maximum amount of mortgages that can be borrowed increased by 11.9%.
But if you look at monthly repayment, the impact of adding P is still a real increase. For mortgages with the same repayment period and the same amount, the monthly repayment and full-term interest expenses are still rising. At present, there is a strong wait-and-see atmosphere in the property market. There are many reasons for this, including the expectation that interest rates will continue to rise, and the roadmap to fight the epidemic is still unclear.
Some market participants describe the relaxation of the stress test as reducing spicy food, but it should be noted that the essence of stress testing is different from other major spicy measures – several types of stamp duties. The objective effect of the stress test is to reduce the upper limit of the mortgage that each prospective buyer can borrow, and several stamp duties increase the cost of buying and selling. Relaxing the pressure test has no effect on reducing the cost of buying and selling. In general, relaxing the stress test may have a certain stimulating effect on prospective buyers who have already intended to enter the market. However, for users who were originally on the sidelines, or investors who were hesitant to enter the market because of the high cost of stamp duty, it lacked a driving effect.
In addition, after the stress test is relaxed, the actual contribution to income ratio will probably increase from about 42% to about 47%. The figures are very close to the upper limit of only 50% of the basic contribution-to-income ratio. Even further relaxation, the stimulus effect on the market will be small.
[Sir Shi’s Weekly Prospect and Changed Stocks]Galaxy Entertainment, Ctrip Group, COSCO SHIPPING Energy
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Written by: Executive Director of Yip King Shing According to the Plan Co., Ltd.
Column name : macro theory