Banks Lift Home Loan Costs in Beijing, Shanghai, Guangzhou

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Chinese lenders are lifting rates for home loans in major cities across the country.

Data from Rong360 indicates that multiple cities across China have seen home loan rate hikes since April, including Chongqing, Guangzhou, Nanchang, Ningbo, Shanghai, Shenzhen, Suzhou and Xiamen.

According to their figures 122 banks out of 533 in 35 cities across China have lifted their rates for first homebuyer loans.

At least six major banks in Beijing, including Agricultural Bank of China, Industrial and Commercial Bank of China, Bank of Beijing and China Merchants Bank, have raised their rates for both first and second-home buyer loans since the start of May.

The six banks have lifted borrowing costs by removing discounts on mortgage rates for first-home buyers, as well as lifted costs for second home buyers by raising their floating mortgage interest rate to 20% over the long-term benchmark rate set by the People’s Bank of China.

Chinese banks conventionally use the benchmark lending rate for loans with maturations of over 5 years to determine floating-rate mortgages.

The rate hikes follow Beijing’s launch of heavy curbs in March directed at containing the Chinese capital’s skyrocketing home prices, and tame potential risk.

Banks in other major cities in China have already raised borrowing cost for homebuyers, with lenders in Shanghai reducing their mortgage discount for first homebuyers from 10% to 5%.

Local media in Guangzhou proclaimed the start of the “10% discount era” after the May 1st Holiday, as compared to the 15% basic discount offered by many state-owned and joint-stock banks for first homebuyer mortgages in the past.

Other parts of China are also following suit, with one source in Shandong telling 21st Century Herald that lending policy is tightening, with plans in the work to remove discounts for standard home loans.

 

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