According to the state-run Xinhua News Agency, the nation's second-largest government-owned bank – China Construction Bank – is increasing its mortgage rate for first-home buyers to 1.05 times that of the central bank's benchmark lending rate. Chinese commercial banks in more than a dozen cities also have lifted the rate by 5% to 10%.
Chinese economists attributed the increased mortgage rates as a response to the problems percolating across China's real estate market.
‘Hikes of the first-home mortgage rate revealed that the banking sector's increasingly pessimistic outlook of China's housing market,’ says Yin Zhongli, deputy director of the Institute of Finance and Banking at the Chinese Academy of Social Sciences. ‘As for how this trend would develop depends on market reactions and the regulative authorities.’
‘Given the liquidity pressure, banks need to reallocate their dwindling credit to other more profitable loans,’ adds Zhu Xiaohuang, vice president of China Construction Bank's Beijing branch.