Responding to Beijing's alarm at the sharp rise in home loans and soaring property prices, some banks in major mainland cities have scaled back their preferential mortgage interest rates to 85 per cent of the benchmark rate from 70 per cent.
Banks recently have been making home loans at a discount to the benchmark rate, currently at 6 per cent. Property consultants said Beijing had not issued any announcement to raise rates, but first-time homebuyers in Beijing, Shanghai, Hangzhou and Nanjing had faced higher interest charges as individual banks tightened lending policies.
Kenneth Pak Kei-yuen, the general manager of Midland China's Beijing branch, said banks had to respond to central government policy, which now is aimed at reining in loan growth and cracking down on property speculation. 'It will not be surprising to see mainland banks further raise mortgage rates in the coming months,' he said.
Pak said transactions in Beijing had tumbled 70 per cent this month, compared with December, as buyers held back as they expected the government would impose tougher measures to curb price rises.
Last Wednesday, China Banking Regulatory Commission chairman Liu Mingkang said the government would slow loan growth this year to about 17 per cent from more than 30 per cent last year as it tried to balance economic expansion with managing credit risk.
Clement Luk, Centaline Property Agency's chief executive for the eastern and northeast regions, said there was a similar situation in Shanghai, Hangzhou and Nanjing, noting that the less generous discounts would affect those with lower incomes.