Chinese banks in various parts of the country have raised their home loan rates as the central government stresses the need to contain the real estate market and stymie risk.
Figures provided Rong360 indicate that 11 out of 29 banks monitored in the Beijing region have raised their first home loan rates to 5% above the benchmark rate, while for 14 banks the premium is 10%.
Rates for second home loans in Beijing currently run between 10% to 20% above the benchmark.
At the opposite side of the country in Shenzhen, 13 out of 21 banks monitored have lifted first home loan rates to 10% above the benchmark, with 2 asking for a 20% premium, while in the mega-city of Shanghai 13 out of 30 banks charge a premium against the benchmark for first home loans.
Analysts say that the hefty premium for home loans demanded by Chinese banks is part efforts by the government to contain elastic demand and demand for second-homes.
Rates for inelastic demand amongst Chinese homebuyers are expected by observers to remain within a reasonable range.
“The hike in home loan rates recently implemented by certain banks is thoroughly based on considerations of the implementation of real-estate macro controls and the prevention of risk,” said Dong Ximiao (董希淼), senior-researcher at the Chongyang Institute for Financial Studies, Renmin University, to the People’s Daily.
Dong said that banks are using rate hikes to achieve more prudent management of their lending operations, as real estate control policies deepen and official scrutiny of the financial sector and shadow banking intensifies.
Despite recent hikes by banks China’s home loan rates still remain at a modest pitch compared to long-run historical levels.
During the period from 1991 to 2015 the maximum benchmark rate for loans of five or more years was 15.3%, whileforof most of the past several years the rate has remained at around 6%, as compared to 4.9% at present.