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 2009 as a whole, the volume of loans drawn down amounted to a record high of HK$36 billion and the usage rate (in terms of drawdown loan amount against total market mortgage drawdown) increased from 11% in 2008 to 18% in 2009. It is notable that 90% of MIP applications received are for secondary market properties. The figure demonstrates that mortgage insurance is instrumental in assisting homebuyers in the secondary market.

The Corporation announced the following revisions to the MIP on 13 August 2010:

(a) Suspending applications of  mortgage loans exceeding 90% LTV ratio;

(b) Lowering the maximum amount for mortgage loans of 90% or below LTV from HK$12 million to HK$7.2million¹; and

(c) Capping the maximum debt-to-income ratio at 50% for all income groups.

The revisions will apply to MIP applications with provisional sale and purchase agreement signed on or after 14 August 2010.

¹ The limit is applicable to loans with mortgage insurance cover starting from 70% LTV threshold.  For loans with mortgage insurance cover starting from 60% LTV threshold, the current maximum loan at HK$6 million will remain unchanged.

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.