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SQESalespersons Qualifying Examination✓EAQEEstate Agents Qualifying ExaminationThe HKMA tightens its prudential guidance so that banks may lend only a lower maximum loan-to-value ratio on residential mortgages. Ms Wong, a first-time buyer, was planning to buy a HK$6,000,000 flat with a bank loan. What is the most direct effect of the change on her?
Answer: she needs a larger down payment. A lower loan-to-value ratio means the bank lends a smaller share of the price, so the buyer must fund more herself; this reduces effective demand. Why not the others: - Higher stamp duty: ad valorem stamp duty depends on the price or value of the property, not on the size of the loan. - Higher interest rate: a loan-to-value cap limits the size of the loan; it does not set the interest rate, which each bank prices separately. - Larger loan: this reverses the rule; a lower loan-to-value ratio means a smaller loan for the same price. Rule: mortgage policy (such as loan-to-value limits) is a technical factor: tightening reduces purchasing power and demand; relaxing increases them. Source: SQE Syllabus 1.3.2 (mortgage policy); HKMA prudential measures for property mortgage loans; as at Oct 2026
Candidates reverse the ratio, thinking a lower loan-to-value ratio gives a bigger loan.
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