City banks ease up on mortgages
By Zhang Fengming |
July 10, 2010, Saturday
|
Print Edition
Print Edition
Some banks in Shanghai are loosening mortgage policies for third or more homes in a sluggish market.
The Industrial and Commercial Bank of China grants third-home mortgages but charges higher interest rates and down payments.
The biggest bank in the world in terms of market value charges at least 20 percent more on interest rates on third mortgages. The minimum down payment is 60 percent.
The State Council said in late April that the minimum down payment on second-home mortgages would be raised to 50 percent from 40 percent and an extra 10 percent interest rate applied. For three or more homes, even higher requirements on both down payments and interest rates should be levied.
Banks were also advised to suspend third-home mortgages in cities where housing prices rose too rapidly.
Banks in Shanghai followed the call to tighten home mortgages.
However, with business sluggish, banks are seeking ways to expand the mortgage market.
House prices should fall significantly in a couple of months as tightening measures launched by the central government show more of their effects, Xu Shaoshi, minister of land and resources, said earlier this month.
Home prices may fall up to a fifth in Shanghai over the next few months as developers become more flexible in pricing, according to the latest research by Jones Lang LaSalle China.
Banks in Shanghai face combined losses of 5 billion yuan (US$732 million), or 8 percent of pre-tax profits in 2009, if property prices drop 30 percent, the local banking regulator said. The bad loans ratio on individual mortgage loans may rise to 1.58 percent from 0.36 percent in Shanghai if home prices fall by 30 percent, the Shanghai Bureau of the China Banking Regulatory Commission said.
The Industrial and Commercial Bank of China grants third-home mortgages but charges higher interest rates and down payments.
The biggest bank in the world in terms of market value charges at least 20 percent more on interest rates on third mortgages. The minimum down payment is 60 percent.
The State Council said in late April that the minimum down payment on second-home mortgages would be raised to 50 percent from 40 percent and an extra 10 percent interest rate applied. For three or more homes, even higher requirements on both down payments and interest rates should be levied.
Banks were also advised to suspend third-home mortgages in cities where housing prices rose too rapidly.
Banks in Shanghai followed the call to tighten home mortgages.
However, with business sluggish, banks are seeking ways to expand the mortgage market.
House prices should fall significantly in a couple of months as tightening measures launched by the central government show more of their effects, Xu Shaoshi, minister of land and resources, said earlier this month.
Home prices may fall up to a fifth in Shanghai over the next few months as developers become more flexible in pricing, according to the latest research by Jones Lang LaSalle China.
Banks in Shanghai face combined losses of 5 billion yuan (US$732 million), or 8 percent of pre-tax profits in 2009, if property prices drop 30 percent, the local banking regulator said. The bad loans ratio on individual mortgage loans may rise to 1.58 percent from 0.36 percent in Shanghai if home prices fall by 30 percent, the Shanghai Bureau of the China Banking Regulatory Commission said.
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