Home Loan Rates Rise, Lending Quotas Expected to Tighten Further

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Major cities around China are raising home loan rates further as regulators continues to put pressure on urban real estate markets.

The state-owned Xinhua News Agency reports that Shanghai’s discount home loan rate increased from 90% to 95% of the benchmark rate at the start of April, while Jiangxi’s banking regulator has just revealed that the rate for first home loans has risen to 10% above benchmark, and the rate for pre-owned home loans lifted to nearly 20% above benchmark from 10% in 2017.

Other real estate hot-spots around China are also lifting their home loan rates, including the Hubei province capital of Wuhan and the Jiangsu province capital of Nanjing,

Data from Rong360 indicates that as of the end of February this year a total of 53 bank branches had lifted their first home loan rates, or 9.94% of the total.

In addition to interest rate hikes, Chinese banks are also tightening up their lending quotas for home loans.

According to Rong360 analysts lending quotas are usually more ample at the start of the year, but widespread hikes to home loan rates in 2018 is a sign that banks will continue to tighten their real estate lending quotas, while the number of lenders who suspend real estate lending completely is likely to increase.

Yan Yuejin (严跃进) from the Shanghai E-house Real Estate Research Institute said to Securities Journal that 2017 policies to squeeze lending and credit bubbles have already put considerable pressure on real estate markets, with banks refusing to loosen lending excessively due to concerns over policy controls.

According to Yan real estate lending has also been excessive in the recent past, necessitating an appropriate level  contraction at present.

Home loan rates still have room to rise, with central bank vice-governor Pan Gongsheng’s (潘功胜) recently stating that real estate rates remain at a comparatively low level from a long-term respective, despite the latest round of modest gains.

“Commercial banks will implement a differentiated residential housing credit policy and implement differentiated pricing of home loans, as well as actively support rational demand for new home purchases from households, and in particular new urban households.”

Municipal governments around China have also just launched what analysts are referring to as the fifth round of property sector control policies, as part of ongoing efforts to cool down overheating urban housing markets.

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