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The MIP serves as a useful tool in assisting potential homebuyers to overcome the hurdle of coming up with a substantial down payment for the purchase of a property. From the banking industry perspective, the programme allows the banks to engage in higher LTV lending without incurring additional credit risk and jeopardising the stability of the banking system. In all, it creates a win-win situation for both homebuyers and banks. For the year 2006 as a whole, the HKMC received 11,824 applications with an aggregate mortgage loan amount of HK$24 billion. About 86 percent of MIP loans received are for secondary market properties, demonstrating that the MIP is particularly instrumental in promoting the liquidity of the secondary market. Notwithstanding the interest rate hike between March 2005 and March 2006, the volume of loans drawn down in 2006 amounted to HK$9.2 billion and the market penetration rate of approved loans was 13.3%.
The Corporation has taken the following major steps in 2006 to further enhance the product features and public acceptance of the MIP:
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Expansion of coverage to village houses |
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The increasing popularity of the programme is achieved primarily through on-going product innovation, coupled with continued fine-tuning of the programme’s eligibility criteria in response to changes in market demand. At the request of the banks, and with the support from the Approved Reinsurers, the Corporation announced in February 2006 that the coverage for village houses will be extended up to LTV ratio of 85% with a maximum loan amount of HK$5 million. Some banks immediately offered mortgage loans for village house homebuyers with improved interest rates. The extension provides potential buyers of village house properties with more flexibility in down payment.
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Premium Discount Schemes |
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The HKMC developed an in-house credit scoring model in May 2006 as a tool for measuring the relative credit standing of various MIP borrowers. The model makes use of credit differentiation to streamline the underwriting process and represents a first attempt to implement a Risk-Based Pricing Scheme that offers premium discount. The maximum premium discount under the scheme for a mortgage loan with LTV ratio up to 85% could be as high as 20% of the gross premium amount. In addition, the Corporation has also developed a Loyalty Discount Scheme to encourage previous MIP users to continue to utilise mortgage insurance in the future. Subject to fulfillment of owner occupancy requirement and punctual repayment record for the previous MIP loan, borrowers can attain a maximum discount rate of up to 15% of gross premium.
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Web-based Enquiry of MIP Application Approval Status |
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In October 2006 the HKMC launched an innovative web-based system for status enquiry on MIP applications. This system enables the homebuyers to obtain the most up-to-date status on their applications submitted through the MIP participating banks. In addition, a hotline service is also provided for homebuyers to make more detailed enquiries if necessary. These steps are designed to make the MIP more user-friendly and accessible to potential users.
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Training and Marketing |
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The Corporation has always kept participating banks closely informed of all new developments under the MIP and sought their feedback prior to launch. We have also proactively invited banks and other market players such as estate agents and referral companies to send their staff to attend seminars organised by the Corporation. These seminars serve the purpose of providing thorough training on product features and eligibility criteria so that the attendees are sufficiently equipped to market the new products to their customers.
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