In March 1999, The Hong Kong Mortgage Corporation Limited ("HKMC") launched the Mortgage Insurance Programme ("MIP") with a view to promoting home ownership in Hong Kong. According to the guideline of the Hong Kong Monetary Authority, banks have to comply with a 70% loan-to-value ("LTV") guideline on residential mortgage lending. Yet, with the MIP providing mortgage insurance to banks, banks can lend out mortgage loans more than 70% of the value of the property without incurring additional credit risk. As long as an application meets the relevant eligibility criteria, the bank can lend a mortgage loan of up to 90% LTV ratio under the MIP. In other words, homebuyers may only need to pay 10% of the property price for down payment, which greatly reduces their down payment burden.

Under the MIP, banks lend out mortgage loans, while the insurance premium is paid by the homebuyers. The mortgage insurance aims to protect the participating banks from losses, in general, on the portion of the loan over the 70% LTV threshold due to mortgage payment default by the borrowers. Therefore, in addition to helping people achieve home ownership, the MIP also contributes to maintaining the bank stability. In all, it creates a win-win situation for both homebuyers and banks. For 2010 as a whole, the volume of loans drawn down amounted to a record high of HK$41 billion with usage rate (in terms of drawdown loan amount against total market mortgage drawdown) of 13%. It is notable that 96% of MIP applications received are for secondary market properties. The figure demonstrates that mortgage insurance is instrumental in assisting homebuyers in the secondary market.

From 11 June 2011, the HKMC has lowered the cap on the value of property that can be covered under the Mortgage Insurance Programme (MIP) from HK$6.8 million to HK$6 million. As a result, for mortgage loans with MIP cover starting from 70% loan-to-value (LTV) threshold, the maximum loan amount will be reduced from HK$6.12 million to HK$5.4 million. Meanwhile, for mortgage loans with MIP cover starting from 60% LTV threshold, the maximum loan amount will be reduced from HK$6 million to HK$5 million. In addition, the MIP will not be available to applicants whose income is derived mainly from outside Hong Kong unless they can demonstrate that they have a close connection with Hong Kong (Note). This change is adopted to take account of the prudential measures for residential mortgage loans announced by the Hong Kong Monetary Authority.

Note: For the purpose of processing MIP applications, any application with applicant(s) currently working outside Hong Kong (hereinafter "Overseas Income Applicant(s)") and contributing over 50% of the verified household income (of the application) will not be accepted unless the applicant can provide any one of the following documents:

1. Justification with documentary proof, subject to the HKMC's satisfaction, showing the employment relationship of the Overseas Income Applicant and a local employer;

2. Declaration from the Overseas Income Applicant confirming his/her immediate family member (spouse, parents and descendants only) is residing in Hong Kong.

The Corporation keeps the MIP participating banks well informed of any new developments on the MIP and consults them on new initiatives. The Corporation regularly organises training seminars on MIP product features and eligibility criteria for banks and other market players such as estate agents and referral companies, so that their frontline staff can better understand and explain the details of MIP to their customers.