Banks across China have continued to hike their home loan rates as liquidity tightens in the wake of the ongoing deleveraging drive by regulators.
On 13 June a slew of banks of China unveiled further increases to their lending rates for home buyers.
Commercial banks in Guangzhou have lifted their first home loan rates to 5% to 20% above the prime rate, and essentially rescinded any lending discounts.
The Guangzhou branch of Pudong Development Bank has lifted its first home loan rate to 20% above the prime rate, while for the local branches of China Minsheng and CITIC Bank the premiums are 10% and 5% respectively.
A total of five major lenders in the Cantonese capital have raised the minimum rate for second home purchases to 1.1 times the lending prime rate.
Lenders across Beijing have lifted their rates for second homes to 1.2 times China’s loan prime rate, while first home loan rates are now available at a premium of 5 to 10%.
In the Fujian province capital of Fuzhou some banks have raised rates for first home loans to as much as 10% above the prime rate, while for second homes the premium against the prime rate is as high as 20%.
The data indicates that transaction levels have fallen sharply in tandem with the rate hikes as well as the implementation of other policies to curb the housing market.
Figures from www.ihk.com indicate that 11 of Guangzhou’s districts saw the online sale of 6409 commercial residential properties in May, for a year-on-year decline of over 50%. The average price was 16,251 yuan per square metre, for a month-on-month decline of 2.94% and a year-on-year gain of 5.63%.
In Beijing the commercial residential property transaction volume was 4802 in May of this year, as compared to 8505 for the same period in 2016.
According to industry observers recent sustained gains in funds costs are compelled commercial banks to rein in the cost of their bank loan business, and introduce new rules for the channelling and usage of capital.
Zhang Dawei, chief analyst with Centaline Property, said that recent round of real estate control policies have led to reductions in loan discounts, a marked increase in the time required for loan applications, as well as ongoing gains in fund costs for borrowers, putting pressure on lending banks.
According to Zhang transaction volumes have faltered across the board, while prices are also beginning to weaken.
Zhang further points out that with capital costs rising and the annualised cost for fixed yield wealth management products approaching 4.1%, a mortgage loan with a 4.9% benchmark rate is now a low income product for most banks, which will likely prompt them to continue to raise borrowing costs.