Our submission to the Central Bank on CP87 – Mortgage lending caps

We submitted a paper to the Central Bank on the mortgage cap proposal they have put out for consultation. Our view is that apart from being a crude instrument that it doesn’t work, Hong Kong is being used as an ‘example’ when in fact they are the very example that demonstrates best that the policy is misguided.

As practitioners we think a far more nuanced approach with other solutions such as higher stress tests, a freeze on underwriting criteria and mortgage insurance should the lender wish to avail of it are better.

Our submission can be downloaded here.


  1. Tom

    A 3% stress test?, dont you think thats a bit weak. The last crisis caused a lot more than 3% stress.

    • Karl Deeter

      Hi Tom, thanks for dropping by and for the comment. The 3% stress test isn’t a measure of ‘stress’ it’s the ability of a borrower to endure a 3% hike in interest rates when priced over the current SVR which means you gauge if the person could still afford payments at interest rates of c. 7.5-8%.

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