Top Biz News

Banks align lending to cool measures

(China Daily)
Updated: 2006-07-25 08:54

Like many other banks, Huaxia requires a minimum down payment of 30 per cent for property with a total area bigger than 90 square metres, compared with 20 per cent for smaller apartments. For villas, the down payment can be as high as 50 per cent.

Higher down payments are required for larger apartments and villas because they are more popular with investors and speculators than smaller apartments.

The mortgage interest for what bankers consider "investment-oriented" properties and villas is now set by most banks at about 1 percentage point above the average rate of 5.751 per cent a year. "We generally discourage loans to people buying properties for investment purposes," said Zheng. "We'll either require a higher down payment or flatly reject the application from investors and speculators," he added.

Yao Libao, manager of Shenzhen Development Bank's individual loans centre, said his bank is also shying away from lending to property speculators. He said his banks apply the same criteria in assessing the credit worthiness of all applicants. But "we are less inclined to lend to buyers of high-end or investment-oriented properties," he said.

Unlike its many counterparts in Beijing and Shanghai, Guangdong Development Bank in Guangzhou has no plans to take action on mortgage financing. "Many prospective homebuyers and investors are sitting on the sideline as the full impact of the government measures unfolds," said Liu Xiangdong, an executive in the bank's consumer banking department. "Demand for mortgage loans has been on the decline," he said.

But bankers in Shenzhen seem less sanguine. Wang Jian, manager of Shenzhen Development Bank's housing and consumer credit department, said his bank set a "very strict" approval criteria for mortgage loans to the second-hand housing market even before the introduction of the government measures.

Now, "we are paying more attention to the credit worthiness of the borrowers," Wang said. In doing so, "we look beyond the income of the applicant and the value of the property," he said.

For example, if a Shenzhen resident applies for a mortgage loan to buy a property outside the city, "we know that he is not a homebuyer," Wang said. "We would either reject the application or charge him a much higher interest rate," he said.