Property loans halted in 2nd and 3rd-tier cities

China Daily, July 15, 2011

Commercial banks are halting individual property loans in the face of tightening monetary policy and limited lending quota, the China Securities Journal reported Thursday.

"We will not accept property loan applications at present, even if it is from a first-time home buyer," a bank staff in Chongqing told the paper.

Meanwhile, some banks are mulling over whether to raise the ratio of down payment.

"You'd better prepare to pay 40 percent of your home price as down payment, because commercial banks are going to ask more for a property loan," said Gong Hang, a bank staff in Taiyuan, Shanxi province. "It is only a matter of time," he said.

Requirements for second-home loans have also become stricter in these cities. Home buyers may have to pay 50 to 60 percent of their home prices as down payments, with lending interest rates 10 to 15 percent higher than the benchmark rate, the paper said.

China is tightening monetary measures to combat rising inflation.

The People's Bank of China increased interest rates for the third time this year by 25 basis points on July 7.

Earlier in June, the central bank raised the reserve requirement ratio for banks for the sixth time this year, after China's consumer prices rose 5.5 percent in May to a nearly three-year high.

China CPI rose 6.4 percent to a three year high in June.