China’s big banks slow lending pace, devote 90pc of new mortgages to first-time buyers

China’s big four state-owned banks, which collectively grant more than half of the nation’s mortgage loans, significantly slowed their lending pace in the first half of this year in response to a government call, and devoted 90 per cent of their new mortgages to first-time homebuyers.

In the first half the four banks – Industrial and Commercial Bank of China, Bank of China, China Construction Bank and Agricultural Bank of China – extended about 1.3 trillion yuan (US$197.6 billion) of new mortgages, according to aggregate numbers obtained from their interim results. The growth rate of outstanding mortgages tapered off substantially.

Three of the four – ICBC, BOC and ABC – said they directed at least 90 per cent of new mortgages to first-time buyers, while CCB didn’t disclose the ratio. Analysts point out this is a strategy at odds with profit-driven principles as first-time buyer mortgage rates are much lower than second and third-time buyer rates.

“In the first half, first-time buyer mortgages accounted for 92 per cent of our total mortgages, the highest among peers,” Wang Wei, a vice president with ABC, said at a results press conference on Thursday. “We maintain a rate for first-time buyers no lower than the benchmark rate, while the rate for second-time buyers is 10 per cent over benchmark, and a 20 per cent premium for those in overheating cities.”

The scenario is in stark contrast with just eight months ago when looser monetary policy and surging demand for homes amid rising prices saw major banks spare no effort to lend to homebuyers.

In 2016 new mortgage granted by all four banks accounted for more than half of their total new loans of 1.377 trillion yuan. BOC, the smallest of the big four and not typically known for its domestic mortgage lending business, allocated 81.8 per cent of its total new loans that year to homebuyers, the highest proportion among the four.