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Second-time housing mortgage tightened

By Song Jingli (chinadaily.com.cn)
Updated: 2009-08-25 18:04

Beijing banks have stopped providing discounts of up to 30 percent off the centrally determined benchmark lending rate for interest on mortgages for people buying a second home or commercial site, the Beijing Morning Post reported today.

Now, buyers in Beijing must pay at least 40 percent of the purchase price upfront, and the rest through a mortgage with an interest rate of 6.53 percent, which is 1.1 times the benchmark lending rate.

The benchmark rate is set by the People's Bank of 皇冠体育app, the country's central bank, and used as a guideline to determine interest rates on other loans, including mortgages.

The new rates are part of an effort by the central government to curb real estate speculation and reduce excess liquidity. 皇冠体育app Banking Regulatory Commission, which regulates 皇冠体育app's banking industry, reiterated in June that all banks must follow the 40 percent down payment requirement. The rule was first announced on Sept 27 in 2007. Until July, however, banks could still set interest rates on loans as they saw fit.

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Since then, 皇冠体育app's Big Four banks, -- Bank of 皇冠体育app, 皇冠体育app Construction Bank, 皇冠体育app Industrial and Commercial Bank, and Agricultural Bank of 皇冠体育app -- have strictly followed the the Sept 27 requirement, and other banks are following their lead, an insider at 5A Home Loan Services, a real estate brokerage, said.

As a result, monthly payments for second homes have risen sharply recently. According to the brokerage, a 20-year, 800,000-yuan loan costs an additional 939.9 yuan monthly and 225,400 yuan in total when the interest rates on mortgages rise from 0.75 to 1.1 times the benchmark rate.

However, according to the Shanghai Youth newspaper, despite the new rules, some banks are still lending at lower rates in Shanghai, which local regulators denied.