Tighter mortgage rule likely
By Zhang Fengming |
January 12, 2010, Tuesday
|
Print Edition
Print Edition
BANKS in China may enforce the second home mortgage rule more tightly to drive out speculation after the State Council, China's Cabinet, reiterated over the weekend the 40 percent down payment on second homes, industry watchers said.
The Cabinet issued a notice on Sunday demanding a more stringent scrutiny of the property market, reiterating the down payment policy and stating that interest rate on second home mortgages should reflect the applicant's creditworthiness. But it didn't elaborate further.
"Banks are under pressure to further scrutinize individual mortgages on the State Council notice," said an overseas banker who declined to be identified. "We can't go against the trend. It is likely that banks will further tighten the policy."
The China Banking Regulatory Commission has reiterated in the middle of 2009 its requirement on second homes while the central government has taken tougher measures since the second half 2009 to cool rapidly rising property prices in major cities like Shanghai.
China's urban housing prices rose in November by the most in 16 months as buyer sentiment remained strong despite homes becoming more costly. Housing prices in 70 major cities jumped 5.7 percent in November from a year ago.
In Shanghai, prices of existing properties rose to 14,700 yuan (US$2,152) per square meter in December, an annual surge of 41 percent. Prices of new homes rose to an average 20,187 yuan per square meter in December, up 65 percent from a year ago.
In September 2007, authorities asked banks to impose at least a 40 percent down payment with interest rate at least 10 percent higher than the benchmark rate on second home mortgages to curb the red-hot real estate market then.
In December 2007, the regulators issued a follow-up notice which clarified that banks should use family, including the loan applicant's spouse or child, as the criteria to determine second homes.
However, many banks bypassed the requirement in 2008 and early 2009 in a bid to boost business when the property market lost steam.
The Cabinet issued a notice on Sunday demanding a more stringent scrutiny of the property market, reiterating the down payment policy and stating that interest rate on second home mortgages should reflect the applicant's creditworthiness. But it didn't elaborate further.
"Banks are under pressure to further scrutinize individual mortgages on the State Council notice," said an overseas banker who declined to be identified. "We can't go against the trend. It is likely that banks will further tighten the policy."
The China Banking Regulatory Commission has reiterated in the middle of 2009 its requirement on second homes while the central government has taken tougher measures since the second half 2009 to cool rapidly rising property prices in major cities like Shanghai.
China's urban housing prices rose in November by the most in 16 months as buyer sentiment remained strong despite homes becoming more costly. Housing prices in 70 major cities jumped 5.7 percent in November from a year ago.
In Shanghai, prices of existing properties rose to 14,700 yuan (US$2,152) per square meter in December, an annual surge of 41 percent. Prices of new homes rose to an average 20,187 yuan per square meter in December, up 65 percent from a year ago.
In September 2007, authorities asked banks to impose at least a 40 percent down payment with interest rate at least 10 percent higher than the benchmark rate on second home mortgages to curb the red-hot real estate market then.
In December 2007, the regulators issued a follow-up notice which clarified that banks should use family, including the loan applicant's spouse or child, as the criteria to determine second homes.
However, many banks bypassed the requirement in 2008 and early 2009 in a bid to boost business when the property market lost steam.
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