Beijing tightens mortgage lending again

Beijing's financial institutions have tightened mortgage lending once again, and 80 percent of banks have canceled the 30 percent discount on the interest rates of the mortgages for first-time home buyers by reducing the interest discount rate to about 15 percent, reporters from Beijing Times learned from local home agencies, such as 5i5j, on Sept. 6.

Reporters also learned from real estate developers that the minimum down payment for the mortgages of first-time home buyers has been raised from 20 percent of home prices to 40 percent. Industry insiders believe that the tightening of credit policies indicates the possible further tightening of the housing regulation and control policies.

Although the central bank has not adjusted the benchmark interest rate, the exit of favorable interest rates of mortgages has become true. Since the scope for the definition of second-home buyers was expanded in early August to include those who have owned one home without a mortgage, Beijing has comprehensively started tightening credit policies.

According to Zhang Dawei, director of the Department of Three-tier Market Research of Beijing Centaline Property, the agency has currently been unable to apply for a 30 percent discount on the interest rate of mortgages for its first-time home buyers, and they have to firmly adhere to the policies that down payment for second-home buyers must be 50 percent of the home price and the interest rate must be 110 percent of the normal interest rate.

"Previous favorable interest rates are not available at most banks, including the four major state-owned banks, and they are only available at a few branches of certain banks," Zhang said.

He added that the discount on the interest rate of mortgages may maximize at 25 percent, but generally stands at 15 percent.

Hu Jinghui, vice president of 5i5j, a Beijing-based real estate company, said that the banks started disallowing the 30 percent discount on mortgage rates shortly after the introduction of the governments' real estate control policies, but at that time, quite a few banks still maintained the old preferential policy. It became extremely difficult to obtain the 30 percent discount in August, 'and now it is almost impossible to get that big a discount."

According to some developers, a discount of 30 percent is impossible now and according to a person familiar with a real estate project in the Tongzhou area on the outskirts of Beijing, Chinese banks not only disallowed the 30 percent discount on mortgage rates, "but also started to grant the mortgage loans below 80 percent of the purchase price of the first home."

The person added that a first-time home buyer can only borrow 60 percent of the purchase price of a house built by the project in the mortgage loan, and the percentage is only 30 for a second-home buyer. According to sources, domestic banks have not issued any written documents about the cancellation of the 30 percent discount, and they just have disallowed the 30 percent discount when granting loans.

Hu speculated that the rise in the mortgage rate is related to banks' loan quotas and their intent to tighten lending policies. He said the banks currently abide by stricter rules when granting loans. According to Zhang's calculation, a home buyer will have to pay 92,691 yuan more of interest charges if he or she is given a 25 percent discount on the mortgage rates of a 20-year, 800,000-yuan loan than a 30 percent discount. Zhang believes that judging from the current market conditions, the housing price may rebound, but the tightening of the loan policies indicate that once house prices rise again, there definitely will be stricter policies to curb it.

By People's Daily Online