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Bank of China tightens mortgage loans

(Xinhua)
Updated: 2010-02-04 02:32

Bank of China (BOC) has decided to cut discounts that home buyers can get on interest of mortgage loans, a source with the bank's Shanghai branch told Xinhua on Wednesday.

The Shanghai branch has already received orders from the Beijing headquarter to cut the mortgage rate discount to first-time home buyers to 15 percent from the previous 30 percent, said the source.

Taking effect since Feb, the move appeared to be a response to last week's warnings from China's top banking regulator that lenders should keep credit growth at a reasonable pace in 2010 and avoid financial risks as new loans hit a record 9.59 trillion yuan in 2009, almost double that of the previous year.

Altogether 1.4 trillion yuan of mortgage loans were extended by Chinese banks in 2009 while property development lendings totaled 576.4 billion yuan. China saw a rare property boom in history last year as sales sizzled by 75 percent to 4.4 trillion yuan. Price rose the most in 15 years to 4,695 yuan per square meter, up 24 percent year on year, according to data released by the National Bureau of Statistics.

To cool the property market, the government has made a series of moves since last December, including reimposing a sales tax on homes sold within five years of their purchase from this year.

It also required no-less-than 40 percent of down payment for families applying to buy a second or more houses backed with loans. Shares of BOC rose 2.21 percent to 4.17 yuan, the lowest rise in Wednesday's banking sector which surged 3.68 percent over market rumor that Central Huijin Investment Company might buy more shares in major Chinese lenders.