Experts say these new mortgage products must offer lower interest to succeed
When the People's Bank of China raised the interest rate last month, market watchers said it might spark interest in the new fixed-rate mortgage products being offered by several banks.
But experts said the product had a long way to go before it became popular, pointing out that China's financial and banking markets were still tightly controlled by the central government, and that fixed rates were higher than the bank rate.
'I am sure many homebuyers are looking at the fixed-rate product after the interest rate rise in April,' said Patrick Tang Loi-fu, head of Bank of East Asia's China property lending department. 'But I don't think it will become popular, considering the stability of the mainland's floating rate.'
Homebuyers turned to a fixed- rate mortgage only when they faced the risk of high loan rates, he said. But unlike Hong Kong and western markets, where banks were free to change interest rates to manage the lending risk, most consumer lending rates in the mainland were still managed by the People's Bank of China.
Mr Tang said mainland loan rates had been quite low for a long time and that they did not rise very often.
Last month the People's Bank of China raised its benchmark one-year lending rate by 27 basis points to 5.85 per cent in an attempt to tighten the country's credit policy. Home mortgages rose accordingly.