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With credit scarce, Chinese banks raise mortgage rates
BEIJING | Tue May 10, 2011 6:05am EDT
BEIJING May 10 (Reuters) - Some Chinese banks have raised mortgage rates in the wealthy eastern province of Zhejiang, an indication that tightening credit conditions are pushing banks to rein in loans even beyond regulatory requirements, sources said on Tuesday.
Such a move would help banks increase their profits while reducing their exposure to the risks of a property bubble, analysts said. With demand for homes still strong and the government ordering banks to issue less credit, it has become a lenders' market, allowing banks to push up mortgage rates.
China Construction Bank , the country's No 2 lender, has increased downpayments to 40 percent from 30 percent for people buying their first homes and raised mortgage rates 10 percent higher than the benchmark level, a local loan officer told Reuters.
"This is part of our bank's differentiated mortgage policy," a news official at the bank in its Beijing headquarter said, confirming the new rates in Zhejiang but adding that it was not clear whether such a change would expand to other provinces.
A loan officer with Industrial and Commercial Bank of China in Zhejiang's prosperous capital, Hangzhou, said that other banks had raised rates, but ICBC had not done so yet.
"It won't be long for us to do so as well," the ICBC officer was quick to add.
China has rolled out a slew of monetary and administrative measures to curb excessive housing price rises, including a limit on the number of units each family can purchase and the launch of a property tax on owners of spacious and expensive homes in certain cities.
"The regulators intend to tighten mortgage policies even further," said Wu Jun, an in-house property researcher at a state bank.
The current official requirement is for a downpayment of 30 percent and no more than a 15 percent discount on mortgage rates for first-home buyers, and a 60 percent downpayment and no less than a 10 percent premium on mortgage rates for second-home purchasers.
In practice, most banks have scrapped the discount and scaled down their mortgage-lending operations.
Wu said bank branches in Zhejiang province were raising downpayments and mortgage rates because they wanted to cut their exposure to the sector after seeing falling property prices and transactions in Hangzhou.
New home prices in Hangzhou fell 0.1 percent in March from February. The National Bureau of Statistics is scheduled to publish April data next Wednesday.
The China Business News reported on Tuesday that the Bank of China had imposed higher mortgage rates in Shanghai on some first-home buyers and some smaller lenders have either stopped mortgage lending or increased mortgage rates in the city. (Reporting by China Economics Team; Writing by Langi Chiang; Editing by Simon Rabinovitch)
BEIJING | Tue May 10, 2011 6:05am EDT
BEIJING May 10 (Reuters) - Some Chinese banks have raised mortgage rates in the wealthy eastern province of Zhejiang, an indication that tightening credit conditions are pushing banks to rein in loans even beyond regulatory requirements, sources said on Tuesday.
Such a move would help banks increase their profits while reducing their exposure to the risks of a property bubble, analysts said. With demand for homes still strong and the government ordering banks to issue less credit, it has become a lenders' market, allowing banks to push up mortgage rates.
China Construction Bank , the country's No 2 lender, has increased downpayments to 40 percent from 30 percent for people buying their first homes and raised mortgage rates 10 percent higher than the benchmark level, a local loan officer told Reuters.
"This is part of our bank's differentiated mortgage policy," a news official at the bank in its Beijing headquarter said, confirming the new rates in Zhejiang but adding that it was not clear whether such a change would expand to other provinces.
A loan officer with Industrial and Commercial Bank of China in Zhejiang's prosperous capital, Hangzhou, said that other banks had raised rates, but ICBC had not done so yet.
"It won't be long for us to do so as well," the ICBC officer was quick to add.
China has rolled out a slew of monetary and administrative measures to curb excessive housing price rises, including a limit on the number of units each family can purchase and the launch of a property tax on owners of spacious and expensive homes in certain cities.
"The regulators intend to tighten mortgage policies even further," said Wu Jun, an in-house property researcher at a state bank.
The current official requirement is for a downpayment of 30 percent and no more than a 15 percent discount on mortgage rates for first-home buyers, and a 60 percent downpayment and no less than a 10 percent premium on mortgage rates for second-home purchasers.
In practice, most banks have scrapped the discount and scaled down their mortgage-lending operations.
Wu said bank branches in Zhejiang province were raising downpayments and mortgage rates because they wanted to cut their exposure to the sector after seeing falling property prices and transactions in Hangzhou.
New home prices in Hangzhou fell 0.1 percent in March from February. The National Bureau of Statistics is scheduled to publish April data next Wednesday.
The China Business News reported on Tuesday that the Bank of China had imposed higher mortgage rates in Shanghai on some first-home buyers and some smaller lenders have either stopped mortgage lending or increased mortgage rates in the city. (Reporting by China Economics Team; Writing by Langi Chiang; Editing by Simon Rabinovitch)
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