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Shanghai’s combined value of property-mortgage insurance premiums slumped 43 percent in the third quarter as home owners moved to pay off loans and redeem policies.
Accumulative insurance premiums on home mortgages for the year plunged to 408 million yuan (US$50.4 million) as of the end of September, from 705 million yuan as of June 30, China Insurance Regulatory Commission Shanghai bureau in said yesterday.
"Government macroeconomic policies made more people choose to repay property loans ahead of their timetables," said Tu Xin, director of the statistics department at the bureau. "Besides, potential home buyers delayed purchases, causing a slowdown in new premium gains."
To weed out risk at commercial banks, the law requires home buyers to purchase insurance policies on mortgage loans in case they fail to pay back money to lenders, causing sour debt. Insurance on a mortgage loan usually costs 2.4 percent of the total loan and is paid when down payment is made.
If home buyers decide to pay off mortgage loans ahead of schedule, they can claim the portion of the policy yet to be exercised.
Tu said yesterday the city has no immediate plans to abolish property-loan insurance police. Home buyers in Shenzhen, Guangdong Province, requested the insurance be lifted.
Instead, the insurance regulator may allow people to pay the insurance in monthly installments, according to Tu.
Prices of residential units dipped 1.2 percent in October from the previous month, according to the city's statistics bureau. Property transaction volume hit a low of about 400 units a day last month, compared with 700 units a day during the peak month last year.
The outstanding value of home mortgage loans dropped 6.6 billion yuan in the past four months, said the China Banking Regulatory Commission.
(Shanghai Daily November 16, 2005)
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