Many banks in big Chinese cities like Beijing, Shanghai and Guangzhou have hiked the mortgage rates for first home-buyers

Many banks in big Chinese cities like Beijing, Shanghai and Guangzhou have hiked the mortgage rates for first home-buyers, which would further dampen market demand by increasing home-purchasing costs, thus delivering a further blow to the country's already-strangled property market.

Some branches of China Construction Bank in Beijing have raised the mortgage rates for home-buyers by 5 percent to 1.05 times of the benchmark rate, and if an early delivery of loans is required, the rate would rise to 1.1 times.

The effect generating from that would equate to that of two times of interest hikes.

The other three of China's biggest state-owned banks have not yet hiked the rates, but one of the Industrial and Commercial Bank of China’s Beijing branch said that the lender has begun adjusting rates from clients based on the qualifications of them.

Smaller lenders have been more aggressive. Reporters learned from Everbright Bank's client service hotline that the lender has already hiked mortgage rates for first home purchasing by 5 -10 percent while Guangdong Development Bank raised the rate by 10 percent.

Housing prices in Beijing started to ease in recent months, with some developers began selling their buildings at a discount in Beijing’s eastern suburb.

Comments:

"The hikes may dampen demand of home buyers, thus affecting the whole property market. Banks also have their own demands to hike interest rates to increase profits amid the popular credit crunch that every bank is facing, and relatively higher interest rate in market." – Guo Tianyong, director of the Banking Industry Research Center at the Central University of Finance and Economics.

"The real interest costs for first home buyers have increased by 30-40 percent, compared when first home buyers could still enjoyed a 70 percent of discount in the mortgage rate before. The synergistic effect is very obvious, and can play a big role in restraining the purchasing power in the property market."—Li Jiaxin, vice director of financial market division with the Chinese Academy of Social Sciences.

Yin Zhongli, a researcher with the Institute of Finance under CASS, commented that rising mortgage rates means that monetary policies in the real estate sector has not loosened, and the overall policy environment has still be worsening. As sales dropped dramatically following a string of housing-control measures, the speculative bubbles in the market have been pricked gradually and a U-turn in housing prices is likely.

Source:english.caijing