How eager are banks to ‘call’ mortgage loans and what are your options if they do?

Relations between banks and homeowners in Hong Kong have been tense against the backdrop of a sluggish property market and a slow economic recovery in the aftermath of the Covid-19 pandemic.

Incidents and rumours of banks calling loans – demanding immediate payment – have increased as the value of property collateral has dwindled, prompting regulators to step in with relief measures for borrowers.

Distress in the market, especially in the luxury and commercial segments, has crept into the banking system, as lenders grapple with valuations that have yet to bottom out and concerns that troubled homeowners may be unable to repay their loans amid elevated interest rates.

Next year, close to US$34 billion of bank loans in Hong Kong’s property sector will come due, and only 12 per cent of them have been refinanced or repaid, according to estimates by the London Stock Exchange Group.

Here is what you need to know about when and why a bank might – or might not – decide to call your loan, what you can do in that case and why falling interest rates are creating more options for strapped borrowers.