CHAN KIN-POR: President, the elderly are very concerned about inflation. The Secretary indicated in the main reply that the products of the scheme would not be linked with inflation by offering floating payments. I believe, however, if the scheme can be linked with inflation in a certain manner, its products will become more appealing and the elderly will enjoy greater peace of mind. My supplementary question is: If the prices of the properties rise sharply several years after the participation of the elderly in the scheme, can the Government or the HKMC consider increasing their annuity payment to enable them to fight against inflation? I believe the products will become more appealing if the Government can achieve this. Will the Government do this?
SECRETARY FOR FINANCIAL SERVICES AND THE TREASURY: President, the HKMC will actually bear substantial risks in launching this scheme, including the interest rate risk, for the trend of interest rate is unknown. The prevailing interest rate, being extremely low, will definitely rise in the future. The loan interest payable by the elderly will also increase in the future subsequent to the rise in the interest rate. The loan amount will also increase when the elderly sell their properties in the future. In addition to the interest rate risk, there will be the risk resulting from volatility in property prices and various other risks. The risks in terms of figures will increase accordingly should the annuity be linked with inflation.
Furthermore, the participation rate might not be very high during the initial launching period of the scheme. Insofar as the HKMC is concerned, the number of elderly persons and members of the public participating in the scheme must be large before a balance can be struck in the relevant ratios. Hence, I believe after the number of applications for reverse mortgage has reached a certain level and the accounts of the entire scheme have been put on the right track, the relevant authorities will constantly review if the annuity payments can be adjusted upward and if more concessions in loan interest rates can be provided in various ways.