New rules designed to curb people taking out mortgages on a
second home have left it up to banks to use their individual
discretion on granting loans.
On September 27, the People's Bank of China and the China
Banking Regulatory Commission said mortgage holders who apply for
another home loan have to produce a down payment of at least 40
percent and pay a 10-percent premium on their interest rate.
For people seeking a third or fourth mortgage, down payments and
interest rate should be even higher, the bank said, with specific
figures determined by commercial banks.
However, regulators didn't clearly define a second mortgage,
such as whether it is based on an individual's loan or whether
other family members can apply for a new loan. Nor did the rules
say if the new policy still applies to those who have already paid
off their home loan.
Most banks in Shanghai, including the state-owned big four, Bank
of Communications, Shanghai Pudong Development Bank, China
Merchants Bank and Industrial Bank, said they are still working out
detailed rules to follow the authorities' call for the tighter
policies. They expect to roll out their new rules later this
week.
Banks in other provinces were reported to issue differing
policies. For instance, the Beijing branch of China Merchants Bank
determines the second mortgage on an individual's loan, while the
Jiangsu branch of Bank of China determines whether a family is
holding a second loan.
The different practices also trigger the expectation of a
universal detailed rule from regulators.
The central bank and the banking regulator were not available
for comment on those details yesterday.
The move was a tightening measure to curb property speculation
in a booming real estate market.
Su Ning, deputy governor of the People's Bank of China, said it
is unlikely that people would apply for a second mortgage at a
different bank to duck the tighter credit requirements, because
they would be tracked by the central bank's nationwide individual
credit database.
An unnamed official from a joint venture bank in Shanghai also
admitted yesterday that banks would rather sit on the sidelines and
see what rivals were offering, rather than laying down new
policies.
Mortgages are the most lucrative personal financial products for
banks, explaining why lenders are staying cautious. They must
follow the central government's call to curb credit to speculative
property transactions and also keep attracting new clients.
(Shanghai Daily October 11, 2007)
