The Monetary Authority of Macau yesterday issued banks the new guidelines on residential mortgage loans. The guidelines will become effective on December 1, 2010. All mortgage loan applications received from that date onwards will be processed according to the new standards. The new guidelines aim at “ensuring stable development of banks’ residential mortgage lending”, the authority said. They are part of a wider package announced last week by the Macau government to fight real estate speculation. The guidelines set out the following major standards: - Loan-to-value ratio: This is generally referred to as the LTV ratio, and a maximum limit of 70 percent has been set. However, for those properties with a value less than or equal to MOP3.3 million purchased by Macau residents, a higher LTV ratio of up to 90 percent may be offered, subject to a maximum loan amount of MOP2.31 million. 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. - 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 percent has been set. - Maximum loan maturity: The maximum maturity for mortgage loans should not go beyond the retirement age of the borrower concerned. In addition, the guidelines require 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.