Hong Kong Estate Agent Exam: Mortgage Types Comparison

Last updated: April 2026

For candidates preparing for the Estate Agents Qualifying Examination (EAQE) or the Salespersons Qualifying Examination (SQE), understanding property financing is not just an exam requirement—it is a critical day-to-day skill. As a licensed estate agent in Hong Kong, you must be able to accurately explain financing options to prospective buyers while adhering to the strict guidelines set by the Estate Agents Authority (EAA) and the Hong Kong Monetary Authority (HKMA). For a broader overview of the licensing process, be sure to review our Complete Hong Kong Estate Agent Exam Exam Guide.

This article provides a comprehensive comparison of the primary mortgage types available in Hong Kong, the regulatory frameworks governing them, and practical calculation scenarios you are likely to encounter on your exam.

Regulatory Framework: HKMA and EAA Guidelines

Before diving into specific mortgage products, estate agents must understand the regulatory landscape. The HKMA dictates the maximum Loan-to-Value (LTV) ratios and Debt Servicing Ratios (DSR) that banks can offer. Under the EAA Code of Ethics, agents must not provide misleading financial advice and should always recommend that clients seek final approval from banking institutions.

• Debt Servicing Ratio (DSR): The HKMA mandates a baseline maximum DSR of 50%. This means a borrower's total monthly debt obligations (including the new mortgage) cannot exceed 50% of their gross monthly income.
• Stress Testing: Historically, the HKMA required a +2% interest rate stress test. However, following the relaxation of property cooling measures in early 2024, the strict +2% stress test was suspended for most standard residential mortgages, placing the primary focus on the 50% DSR limit. (Note: Always verify the latest HKMA circulars, as exam questions may reflect recent policy shifts).

Primary Mortgage Types in Hong Kong

The Hong Kong mortgage market is heavily dominated by floating-rate mortgages, specifically HIBOR-linked and Prime-linked plans. Fixed-rate mortgages exist but hold a very small market share.

1. HIBOR-Linked Mortgages (H-Plan)

The Hong Kong Interbank Offered Rate (HIBOR) is the rate at which banks lend to one another. H-Plans are the most popular mortgage type in Hong Kong, accounting for roughly 90% of all new residential mortgages.

• Formula: HIBOR + Percentage Margin (e.g., H + 1.3%).
• Volatility: HIBOR fluctuates daily based on market liquidity and US Federal Reserve interest rate movements (due to the HKD/USD peg). Most mortgages use the 1-month HIBOR rate.
• The "Cap Rate" (Lock-in Mechanism): Because HIBOR can spike unpredictably, all H-Plans come with a "Cap Rate" tied to the Prime Rate (e.g., P - 2%). The borrower pays whichever is lower: the calculated H-Rate or the Cap Rate. This protects buyers from extreme interest rate shocks.

2. Prime Rate Mortgages (P-Plan)

The Prime Rate (or Best Lending Rate) is determined by individual banks. It is generally more stable than HIBOR and changes less frequently.

• Formula: Prime Rate - Percentage Margin (e.g., P - 2%).
• Big P vs. Small P: In Hong Kong, banks typically offer one of two Prime Rates. The "Big P" (traditionally offered by banks like Standard Chartered or Hang Seng) is slightly higher, while the "Small P" (offered by HSBC and BOC) is slightly lower. The margins subtracted (the "minus" portion) are adjusted so the effective rates end up being highly competitive across banks.
• Usage: P-Plans are often preferred during periods of high interbank liquidity volatility or for specific property types like older tenement buildings (Tong Lau) or subsidized housing (e.g., HOS flats without premium paid).

3. Fixed-Rate Mortgages

Unlike the US or UK markets where 30-year fixed rates are common, Hong Kong fixed-rate mortgages typically only lock in the interest rate for the first 1 to 3 years. After the fixed period expires, the mortgage automatically converts to a floating rate (usually an H-Plan or P-Plan). These are ideal for buyers seeking absolute payment certainty in the short term during a rising interest rate environment.