State-run lenders in the Guangdong province capital of Guangzhou have once again raised interest rates for home loans, in a sign that the government is determined to curb speculative real estate investment.
According to China Central Television the big four state-owned banks simultaneously announced at the start of February that they would be raising rates for first home loans in Guangzhou from 5% to 10% above the benchmark rate, while keeping the premium for second home loans steady at 15%.
This marks the fourth increase in home loan rates in Guangzhou since the start of 2017, when banks provided a 15% discount compared to the benchmark rate for first home loans.
According to industry insiders the move further signals the Chinese government’s determination to ensure that homes are “used for occupation, not speculation.”
An executive at a state-owned bank said to CCTV that one reason for the rate hikes is expectations of heightened scrutiny by regulators in 2018, and a tighter total lending volume compared to last year.
“But this isn’t the main reason,” said the executive. “The key reason is that the Central Economic Work Conference previously stressed the need to ‘control the sluice gate of money supply, and maintain rational growth in monetary credit and social financing.’
“Given this overarching theme, banks have made adjustments to lending volumes and investment.”
The big state-owned banks taking a unanimous lead in interest rate hikes means the rest of the sector can be expected soon follow suit.
“The big four banks account for over 80% of the home loan market, and the rate adjustments of other banks are based on the adjustments that they make,” said the executive.