The number of residential mortgage loans in negative equity fell to around 67,600, with a value of $107 billion in the fourth quarter.

The Monetary Authority said the unsecured portion of these loans is estimated at about $23 billion, down from $33 billion at the end of September. 

Decline in negative equity may be sustained

In his Viewpoint column posted on the Monetary Authority homepage, authority Chief Executive Joseph Yam welcomed the decline.

"As residential property prices rebounded, the number of mortgages in negative equity started falling in the third quarter of last year, from the peak reached in June of an estimated 106,000 cases to around 67,600 at the end of the year," he said.

There is hope, therefore, that the reduction in the number of mortgages in negative equity is being sustained, Mr Yam added.

However, he advised members of the public who plan to purchase residential units to first have a good appreciation of the market's volatility and their own financial staying power.

"And at a time when prices are rising quickly one should think long and hard about these questions," he added.

The Monetary Authority's Deputy Chief Executive William Ryback said the sharp decline in the number and amount of mortgage loans in negative equity, back to around the level in March 2002, is encouraging.

"If the recent recovery in property prices is maintained, the negative equity problem should ease further," Mr Ryback added.

Overall loan-to-value ratio slightly increased

The overall loan-to-value ratio on negative equity loans increased slightly to 128% from 127% at the end of September, as loans that were marginally in negative equity were no longer in negative equity following the recent recovery in property prices.

Reflecting the higher associated risks of loans having a high loan-to-value ratio, the weighted average interest rate on the outstanding portfolio of negative equity residential mortgage loans was 0.94% below the best lending rate, compared with 1.09% below best lending rate at the end of September. 

More than half of negative equity holders pay low rate

In total, about 57% of the negative equity homeowners are paying an interest rate below best lending rate.

Benefiting from the upturn of the economy which helped strengthen repayment ability, the value of delinquent negative equity residential mortgage loans decreased.

As a result, the three-month delinquency ratio of negative equity residential mortgage loans improved to 2.11% from 2.16% at the end of September.

For details, visit the authority's website.