Bank of Communications yesterday decided to clear the air over a mortgage policy that has vexed its existing clients who kept the bank staff busy answering their queries.

The bank, known as BoCom, confirmed existing mortgage owners can enjoy a discount of up to 30 percent on the interest rate of the loans since last Thursday. It also said mortgage owners whose outstanding value of their loans is more than 100,000 yuan (US$14,598) and who already qualified for a previous discount of 15 percent can apply for a 30-percent interest discount from now. But the favorable rate applies if the home is smaller than 140 square meters. If the home is bigger than that, the maximum discount will be 29 percent.

But BoCom mortgage owners should also be aware that if they want to take advantage of the new discount they have to apply for it and sign a new contract, which includes a special term stipulating they are liable to an up to 3-percent penalty if they pay up the loan in advance or transfer the mortgage to other banks over the next three years.

"I had to put aside new mortgage cases and instead focused on answering inquiries from existing clients on their mortgages," said Huang Yiyun, a BoCom credit officer, quoting the heavy workload on the first day of work after the three-day shutdown for new year. "Not all clients planned to sign a new contract to enjoy the lower rate after they found out about the penalty."

BoCom is one of the major state-owned banks in Shanghai which at last made clear its policy on the issue after unveiling details for months since the People's Bank of China on October 27 announced a package of measures to support the real estate industry, including a maximum mortgage interest rate of 30 percent and a smaller down payment.

China Construction Bank yesterday said clients can apply for a maximum 30-percent interest discount from yesterday to February 22. Clients who were previously eligible for a 15-percent discount and have not defaulted twice can apply for the new rate.

Smaller banks, like China Minsheng Banking Corp, have said existing clients with no defaults can enjoy the new 30-percent discount.

Xinhua news agency on Friday said the Industrial and Commercial Bank of China, the Bank of China, the Agricultural Bank of China and CCB will give existing mortgagors a rate discount of up to 30 percent from the beginning of the year.

(Shanghai Daily January 5, 2009)