Banks Hike Mortgage Rates to 40pc Above Benchmark, Not The Top

iFeng: 个别银行利率将上浮40%!房贷利率仍未见顶
At present, the loan rates of the first suites of many banks in Beijing have increased by 15% to 25%, and the highest level has risen by 30%. The loan rates for the first mortgage loans of many banks in Wuhan have increased by 20%; the loan rates for the first suites in Nanjing have generally risen by 15%; Guangzhou, Dongguan, Foshan, and even Some banks have increased the loan interest rate for the first suite by 40%. In Tianjin, although many banks such as the Bank of Communications stated that the current mortgage rate of the first suite is only rising by 10% and the approval rate is fast, CITIC Bank still raises the loan interest rate for the first suite by 30%.

Although the commercial bank's change in the mortgage interest rate is self-issued, it has been officially recognized to some extent and is considered to be "in line with the requirements and trends of interest rate liberalization."
Where's the top? One economist sees 6.5 percent mortgages:
Huang Zhilong, director of the Center for Macroeconomic Research at Suning Financial Research Institute, believes that this is related to the hidden dangers of residents' debt risks. At the end of 2017, the balance of personal housing loans in China was as high as 21.9 trillion yuan, accounting for 70.2% of the total residential sector loan balance; the proportion of residents' debt as a share of GDP (that is, residents' leverage ratio) also rose sharply from 36.4% in 2015 to 48.3%. . The sharp rise in residents' leverage rate has forced the regulatory authorities to turn from encouraging to suppressing residents' leverage.

In January 2018, the China Banking Regulatory Commission (CBRC) clearly stated that efforts should be made to curb the leverage ratio of residents, focusing on controlling the excessive growth of residents' leverage ratio, cracking down on misappropriation of consumer loans and illegal overdraft of credit cards, and strictly controlling the inflow of personal loans into the stock and housing markets.

Huang Zhilong stated that the consideration of financial sustainability is also an important reason why banks are no longer strongly motivated to carry out mortgage loans. Industry insiders agree: “Even with financial product yields exceeding 5%, homeowners who have paid interest rates of 4.9% or below to homebuyers have become a loss-making business. As for the second-home mortgage rate, there is more space to go up.”

Historical data shows that the spread of bank deposits and loans business is maintained at about 1.5 percentage points in order to maintain financial sustainability without losing money. Judging from the two benchmarks of bank’s capital cost, the expected average annualized return on wealth management products in February reached a 31-month high of 4.91%. At the end of 2017, the interbank deposit interest rate also climbed to around 5%. Based on this calculation, to maintain a spread of around 1.5 percentage points, the mortgage interest rate may rise to around 6.5%.

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