Certain banks in Beijing are expected by industry observers to hike rates higher for first home buyer loans, in order to further curb their fraudulent use by speculative investors.
According to Hexun a source from a Beijing-based commercial bank said that some banks in the Chinese capital plan on issuing directives prior to the week’s end to raise interest rates for first home buyer loans.
“Because the second-home down payment ratio and lending rates are already quite high, an upward adjustment in first home loan rates is mainly intended to squeeze out demand involving the covert use of first home loans for investment,” said the source.
Banks in Beijing are for the most part using the benchmark interest rate for first home buyer loans, with some banks adding a 10% premium, while the rate for second-home loans is between 1.1 to 1.2 times the benchmark rate.
The news comes just following the release of official figures by Beijing’s banking regulator pointing to a sharp drop in first home buyer loans as a percentage of all home loans.
Policies to prevent bubbles in the property market in tandem with China’s ongoing deleveraging campaign have served to significantly slow growth in personal home loans since the second half of last year.
Speaking at the 2017 Bo’ao Real Estate Forum Ba Shusong, chief economist for the China Banking Association, said that real estate loans will continue to tighten, and that the use of leverage as well as the leveraging capability of home buyers is still on the slide.
According to Ba obtaining loans will become increasingly difficult, as the majority of banks resume use of the benchmark rate of first home loans with some hiking rates above it.
Official data indicates that Beijing’s new personal home loans fell significantly as a percentage of all lending in the second half of 2016, while new personal home loans have displayed a steady trend of decline since the start of the year, falling from 24.47 billion yuan in February to 12.2 billion yuan in June.