China’s central bank is pushing commercial lenders to hold mortgage rates steady to curb the growth of home loans
- A state-owned bank has increased mortgage rates for first-home buyers, with borrowers now paying about 5.15 per cent, up from about 4.9 per cent
- China’s household leverage ratio rose to 53.2 per cent at the end of 2018 from 17.9 per cent in 2008
The People’s Bank of China has asked commercial lenders not to lower the interest rate of home mortgages from the current level in order to curb the growth of home loans, according to people familiar with the matter.
The PBOC offered verbal guidance to state-owned banks, joint stock banks and other commercial lenders, the people said, asking not to be identified as they’re not authorised to speak publicly. Banks received the guidance early this month, according to two of the people.
The move signals policymakers remain committed to curbing risks in the real estate market even amid slowing economic growth. Declining fiscal revenue growth has prompted some local policymakers to ease rules on property purchases to boost land sales income, leading to a re-acceleration in the sector earlier this year.
The weighted average rate of personal home mortgage loans declined in the first quarter, the first drop in more than two years. China’s new home price growth accelerated in May as loosening purchase requirements in smaller cities boosted demand.
One person at a local branch of a state-owned bank said the lender has increased mortgage rates for first-home buyers, with borrowers now paying about 5.15 per cent, up from about 4.9 per cent. The PBOC has not shifted its benchmark one-year lending rate since 2015, and has moved to ease financial conditions multiple times for small and private businesses to aid growth, primarily through the use of its reserve-ratio tool.
The Chinese central bank did not respond to a faxed request for comment.
