A spokesman for the People's Bank of China said Thursday that the country's financial institutions will continue to support the healthy development of the housing sector.

In response to press questions concerning the ending of favorable interest rates for housing loans, the spokesman said as a pillar industry of the national economy, the housing sector has played a significant role in expanding domestic demand and promoting consumption. The latest move aims to rationalize the interest rate structure and help commercial banks improve risk management; it does not indicate any change of financial support for the housing sector.

The central bank announced Wednesday that as of March 17, housing loans will no longer enjoy favorable interest rates. Instead, the interest rate for private housing loans will be raised 0.2 percent to approximately the same rate as other loans. At the same time, the minimum down payment will be raised from 20 to 30 percent.

China's commercial banks began to grant housing loans at favorable interest rates in 1998. By the end of February 2005, outstanding commercial housing loans had exceeded 1.65 trillion yuan, accounting for 23 percent of commercial banks' medium and long-term loans, a big push to the development of the housing sector.

The spokesman said over the past few years housing prices have been abnormally rising in some places. In 2004, the average price for commercial housing rose 14.4 percent. Residential housing was up 15.2 percent, much higher than the rise of other price indices.

He said the quite rise of housing prices may lead to financial risks, and that the readjustment of interest rates would help guide the housing sector to a "rational price track."

Source: Xinhua