Expected mortgage rate rise to 8.613% aimed at reining in property prices
(BEIJING) China’s central bank is expected to increase the interest rate of mortgage loans to 1.1 times the benchmark one-year lending rate this week to curb the property market, state media reported yesterday.
If the rise goes ahead, the interest rate for five-year mortgage loans could be as high as 8.613 per cent, China Daily reported, quoting unnamed sources. The current five-year lending rate reached 7.83 per cent after the People’s Bank of China raised the interest rate for the fifth time this year on Sept 13.
The expected move is aimed at clamping down further on property speculation in a bid to curb soaring real estate prices, the report said.
‘With the expansion of mortgage loans, and as the central bank continuously raises interest rates, mortgage loans are beginning to face a high risk of default,’ said China Construction Bank, the lender with the highest mortgage loans in China, in its latest report.
Total non-performing mortgage loans in three major commercial banks – China Construction Bank, the Industrial and Commercial Bank of China, and Bank of China – rose to 19.2 billion yuan (S$3.82 billion) at the end of 2006, from 18.4 billion yuan in 2005, it said.
The central bank is also likely to announce a new policy raising mortgage downpayments to 40 per cent for secondtime home buyers before next week, the Shanghai Securities News reported, citing commercial bank sources.
Downpayments on commercial mortgages will also be raised, the report said, without elaborating. The minimum deposit for an apartment less than 90 sq m (970 sq ft) is currently 20 per cent, rising to 30 per cent for bigger apartments.
Source: AFP (Business Times 27 Sept 07)