Critics Call PBoC Weak as First Time Down Payment Lowered to 20%

The PBoC cut first time down payment to 20%, but it won't apply in first-tier cities where prices are rising. It should have some impact in second-tier cities where prices are slowly rising. It may have little effect in lower-tier cities because banks are unlikely to implement the policy. Additionally, many low income borrowers may already be borrowing their down payment from another lender, so this only shifts some of the debt from a high-interest lender to a bank. Finally, with interest rates unchanged, the policy increases the cost of borrowing for home buyers.

Bloomberg: China Eases Mortgage Down Payment to 20% for First Homes
China’s central bank said it will allow banks to cut the minimum required mortgage down payment to 20 percent from 25 percent for first-home purchases to the lowest level ever as it steps up support for the property market.

The eased requirements will be for buyers in areas without the purchase restrictions that are applied in some of the biggest metropolitan areas such as Beijing and Shanghai, the People’s Bank of China said Tuesday in a statement on its website. The minimum down payment for second-home purchases was cut to 30 percent from 40 percent, the central bank said.
China's housing cheerleader, Ren Zhiqiang, criticized the policy as weak. Critics point to interest rates, saying the drop in down payment only raises the cost of a mortgage. Others saw a limited impact:
On the other hand, real estate analyst Dawei said that compared with the previous policy, the main part is the first home down payment can be reduced to 20%, in addition to 30% down payment for a second home when the first mortgage loan is still outstanding before can be down. From a market reality, this part of the actual stimulus affects a limited number of buyers.

Second, market differentiation, the implementation of policy varies. The expected positive response will mainly be in second-tier cities, in third- or fourth-tier cities every bank is lending with caution. Odds of implementation is unlikely.

Third, this policy will reduce the down payment mortgage company against some small down payment loans, lower down payment mortgage demand.

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