2014-09-24

Chinese Cities Ease Lending Standards, But Will The Banks Follow?

More Chinese Cities Relax Mortgage Policy as Property Sales Fall
The eastern port city of Qingdao said yesterday that households selling their only home to buy a new one should be considered first-home buyers as long as they’ve paid off the mortgage, broadening the scope of borrowers eligible for lower down payments and interest rates. The city joins Shaoxing in Zhejiang and the southeastern province of Fujian that loosened the definition of the category of the buyers last month.

Nanjing has also called for relaxed lending standards. The issue is the banks do not have to follow their recommendations and the banks have previous said they are worried about profits.

China’s four-biggest banks may ease mortgage lending by revising the criteria for loans to first-home buyers, the 21st Century Business Herald reported Sept. 22, citing unidentified people at Industrial & Commercial Bank of China Ltd. and Agricultural Bank of China Ltd.
There is still no confirmation of this rumor.

All of these efforts will fail because the real estate market has peaked. The only thing that can save the market now is major monetary stimulus, which the leadership has said is not coming. Lending standards can be completely thrown out an it wouldn't stop this contraction. The inflation has ended, the deflation cometh.

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