HONG KONG (REUTERS) - Relaxed mortgage rules in Hong Kong that allow buyers to take on bigger loans will drive small-to-medium flat sales, property agents say, with the changes already prompting some sales.

Hong Kong's leader Carrie Lam on Wednesday (Oct 16) expanded borrowers' power by reducing the size of down payments required for home purchases as part of a slew of measures aimed at alleviating the city's housing shortage.

Under the Mortgage Insurance Programme, borrowers can carry a loan-to-value ratio (LTV) as high as 90 per cent on properties worth up to HK$8 million (S$1.39 million). Before, such a high ratio was only permitted on properties worth half as much.

Borrowers can get an LTV of 80 per cent on properties worth as much as HK$10 million, previously capped at HK$6 million.

This means prospective home buyers will not need so much money up front; for example, the down payment on an HK$8 million home will fall to HK$800,000 from HK$3.2 million.

"Last evening, our agents sold three apartments in Fanling (in the New Territories), which was a lot because there haven't been three transactions for a whole month," said Centaline Property Agency Asia-Pacific residential chief executive Louis Chan.

He said that the transactions ranged from HK$4 million to HK$6 million and that the buyers hastened their decision after Mrs Lam's announcement. The sellers also cut their price by 2-3 per cent.

"The new mortgage policy will help the secondary market for flats below HK$10 million," Mr Chan said. "In the last eight years the demand for this segment has been suppressed by the restrictive policies and the transaction volumes have been very low."

Previously, buyers were more likely to consider new homes, for which developers provided high LTV loans.

Mr Sammy Po, residential chief executive of property agency Midland Hong Kong, said that about 10 per cent of sellers of apartments valued below HK$8 million were raising their price by 3-5 per cent, and that he expected a 2-3 per cent price rise in small to mid-sized apartments in the fourth quarter.

Property developers plan to push out new launches faster on the news, with China Evergrande Group 3333.HK expected to release the price list for its new development this week.