Chinese Banks Raise First Home Loan Rates to 20% Above Benchmark

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As lending quotas become scarce in the lead up to the year’s end, a number of Chinese banks are raising their rates for first home loans to as high as 20% above benchmark.

The latest data from Rong360 indicates that first home loan rates are continuing to rise across China as banks begin to exhaust their annual lending quotas.

None of the 23 banks monitored by Rong360 are offering first home loan rates at a discount to the benchmark, while only two are providing rates on par with the benchmark and one has suspended mortgage lending completely.

9 Chinese banks have raised first home-loan rates to 5% above benchmark, 8 are at 10% above benchmark, while three banks are charging a 20% premium.

In addition to raising interest rates for first home loans, all of the banks monitored by Rong360 currently require a 70% downpayment for second homes loans.

7 banks are charging interest rates at a premium of 20% to benchmark for second homes, while 4 banks are charging a premium of 15% and a further 10 banks a 10% premium.

The majority of Chinese banks are facing scarce loan quotas in the fourth quarter, spurring an increase in application times from weeks to months, as well as the complete suspension of mortgage operations at certain branches.

Rong360 analyst Li Weiyi said that the Chinese government sets a home mortgage loan quota for the banks, which some lenders have already used up completely.

Li points out that the prospect of macro prudential assessments is placing further pressure on Chinese banks, who are striving to control their loan-deposit quotas and bring in more funds just as the cost of capital increases.

Analysts point out that interest rates are likely to come down once quotas are re-set next year, while there are also signs that that Beijing’s efforts to expand the home rental market is having an impact upon mortgage demand.

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