With the aim of ensuring stable development of banks’ residential mortgage lending, the Monetary Authority of Macao (“AMCM”), upon thorough consultation with the industry and taking into consideration the practical situation of Macao, established the “Guideline on Residential Mortgage Loans” (“Guideline”).
Today (5 October), the AMCM issued to banks the Guideline, which sets out the following major standards:
1. Loan-to-value ratio: This is generally referred to as the LTV ratio, and a maximum limit of 70% is set. However, for those properties with value less than or equal to 3.3 million patacas purchased by Macao residents (holders of Macao SAR Resident Identity Card), a higher LTV ratio of up to 90% may be offered, subject to a maximum loan amount of 2.31 million patacas. The value of the property concerned should be determined by the lesser of the actual acquisition cost to the borrower or the estimate of value made by the banks. 2. Debt servicing ratio: This is referred to as the ratio of monthly debt payment to monthly income of the borrower, and a maximum limit of 50% is set.
3. Maximum loan maturity: The maximum maturity for mortgage loans should not go beyond the retirement age of the borrower concerned. In addition, the Guideline requires banks to have in place appropriate internal control measures for the business, including those for prevention of concentration risk, prudent property valuation methods and internal audit functions. The Guideline will become effective on 1 December 2010. All mortgage loan applications received from that date onwards will be processed according to the aforementioned standards. The AMCM will, through its on-going supervision, ensure the effective compliance of banks with the requirements and standards of the Guideline.
