Real Estate Financing Still Tightening

A big moment for the Chinese economy approaches. Economic growth has been propped up by real estate. Loan reform designed to funnel credit towards SMEs was launched this weekend, outcome unknown.

iFeng: 楼市调控政策趋严 银行房贷利率普涨

In this general rise in housing loans, the interest rates for first and second home loans of several banks have increased, and the approval of loans has been stricter. According to a reporter from China Business Daily, the China Banking Regulatory Commission recently requested banks in 32 cities to conduct a special inspection of their real estate loan business, with banks with large real estate loans bearing the brunt of the inspection. In addition, as banks have already made relatively large loans to the real estate industry before, the intention to control the size of loans by tightening credit is now more obvious.

Reporters learned through investigation that mortgage interest rates in second-tier cities such as Hangzhou, Suzhou, Nanjing, Xi 'an, Zhengzhou, Nanning, Wuhan and other cities have increased considerably. Some banks have raised the loan interest rate for first-tier apartments directly from the benchmark to 20%, while the loan interest rate for second-tier apartments has risen as high as 25% from the benchmark. In addition, banks have tightened their scrutiny of the use of funds for consumer loans and operating loans for housing loans to prevent funds from bypassing the property market.

Interest rates are high and the wind has changed?

In order to solve major problems such as people's livelihood housing, supervision has been implementing differentiated policies for mortgage interest rates. We will strictly control and raise the loan ratio limit and loan interest rate for the purchase of multiple apartments, while we will be more lenient with the loan interest rate for the first apartment.

It is understood that as early as three years ago, the state-owned big banks in many places were still able to implement a discount of 8.5% or even lower on their first apartments. However, now the trend of bank loans has changed, and the first apartments, which are just needed, are not immune from this general rise in housing loans.

Chen Hua (not his real name) is planning to get married in Changsha. Buying a house is the top priority before marriage. However, when he contacted several banks in the city, he found that the interest rate of the house purchase loan has changed greatly from six months ago.

"Compared with the beginning of the year, the house price in Changsha is still relatively stable, but the interest rate on the house loan has gone up a bit exaggerated." Chen Hua said that the bank loan for the first apartment had a discount on the benchmark interest rate, which was up to 5%. Today, the loan interest rate of most banks has risen to 15% above the benchmark.

He told reporters that a 15% rise in the benchmark mortgage interest rate seemed insignificant, but it meant that a loan of nearly 1 million yuan would have to be repaid more than 400 yuan per month. According to the 30-year term of the loan, the additional interest required for the loan is close to 150,000 yuan. "Since most bank loans are repaid in equal amounts, the part repaid in advance is more interest, which is even more uneconomical for buyers who repay their loans in advance."

Reporters found that the interest rate for bank loans in Changsha, Hunan province, has risen more widely, especially in joint-stock banks, with the interest rate for most first homes rising 15% from the benchmark. The loan interest rate for the second suite is mostly 20% higher than the benchmark, but the loan interest rate for the second suite of a big state-owned bank has also risen to 25% higher than the benchmark, which also means that the loan interest rate has broken "6".

In fact, Hangzhou, Suzhou, Nanjing, Wuhan, Zhengzhou and other places have also received frequent news of bank mortgage interest rate increases in the near future. Take Nanjing as an example. In May this year, many banks raised the interest rate for first-home loans by 5% on the benchmark, which is currently 15% on the benchmark, with a further upward trend.

Market sources said that the mortgage interest rate of some banks in Xi 'an has increased significantly. The loan interest rate for the first suite has increased by 20% according to the benchmark, which is even higher than the loan interest rate for the previous second suite.

Compared with the second-tier cities, Beijing, Shanghai, Guangzhou and other first-tier cities have smaller changes in mortgage interest rates. Reporters visited several large state-owned banks and joint-stock banks and learned that the current loan interest rate for the first suite of most banks is 10% higher than the benchmark, while the loan interest rate for the second suite is adjusted from 10% higher than the benchmark to 15% higher than the benchmark.

"The current change in mortgage interest rate may be closely related to the policy, and the scale of bank loans may continue to shrink in the future." A large state-owned bank disclosed to reporters that the rise in mortgage interest rates is determined by the overall market factors, and the bank will make adjustments according to the actual situation.

Tighter Supervision on Bank Shrinkage

The rise in mortgage interest rates is closely related to the tightening of regulatory policies. In order to strengthen the macro-control of the real estate market, the supervision will severely crack down on the illegal entry of funds into the real estate market and will not relent in its punishment.

It is understood that since July, the real estate trust has shown obvious signs of "braking", the supervision has implemented balance management, and the approval of products has slowed down.

It is noteworthy that the general office of the China Banking Regulatory Commission recently issued the Notice of the General Office of the China Banking Regulatory Commission on Carrying out Special Inspection of Real Estate Business of Banking Institutions in 2019, deciding to carry out special inspection of real estate business of banking institutions in 32 cities, and will severely investigate and punish all kinds of illegal acts that divert funds into the real estate industry through misappropriation or diversion.

Reporters learned that the special inspection will specifically target financial institutions with large real estate loan volume and will conduct spot checks on relevant business specifications.

"The real estate industry is a lever game. With the strong support of credit, house prices may have an upward trend. Supervision and strict control of real estate credit is also a policy of strict control of real estate to avoid risks caused by bubbles. " The aforementioned state-owned big banks said.

The source told reporters that under the supervision policy, banks will reduce the amount of mortgage loans and tilt credit resources to first-tier cities, which will reduce the supply of second-tier cities and raise the interest rate of loans. "The mortgage market will cool down in the second half of the year, and banks will increase their control over the total amount."

A stock broker told reporters that in the past two years, the bank's credit to the real estate industry has not been small in scale, with annual growth even reaching double digits. "As the supervision has tightened on real estate financing at this time, banks will also follow up with the contraction in credit."

"Housing loans will still be approved, but it is more difficult than before. There is no such big discount on interest rates." The source said.