Chinese banks raise mortgage rates, helping to rein in runaway prices that puts housing affordability further out of reach

Shenzhen, Nanchang, Hangzhou are among the cities that have seen rising mortgage rates for first-time borrowers and second-home buyers

The national average mortgage rate for first-home buyers rising 11 basis points since January to 5.33 per cent in May

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A couple watching apartments under construction in Hangzhou on September 5, 2016. Photo: Bloomberg

Published: 8:45am, 22 May 2021Updated: 8:54am, 22 May 2021

Commercial banks across several Chinese cities have begun raising their mortgage rates, as they increase the cost of buying homes to help the government keep a lid on speculative buying that is fuelling a runaway housing bubble.

In southern China’s technology metropolis Shenzhen, nine banks followed China Construction Bank in raising the mortgage rate for first-time buyers by 15 basis points to 5.1 per cent, while second-home buyers have to pay 5.6 per cent for loans, up 35 basis points.

Even in smaller cities like the Jiangxi provincial capital of Nanchang, with a population of 5 million people, the rate for first-home loans has jumped by 47.5 basis points to 6.125 per cent at the Industrial and Commercial Bank of China and Agricultural Bank of China, while other banks raised their rates to 5.88 per cent, according to a May 12 survey by the real estate agency Leju. Second-property buyers had to pay between 5.8 per cent and 6.37 per cent.

“Mortgage rates fluctuate [because] a few cities had a sudden increase in transaction volume [and] a rising demand for housing loans,” said Zhang Dawei, the chief analyst at Centaline Property Agency, adding that rate changes are also related to the credit capacity of various banks, and whether they have reached the regulatory limit for loans.

Commercial real estate in Wanan county in Jiangxi province in southeastern China on April 4, 2018. Photo: SCMP Pictures

Chinese authorities, anxious to maintain social stability during the centenary year of the ruling Communist Party, are rushing to keep the lid on housing prices and other political hot button issues. Last month, China’s home prices soared by 0.5 per cent across 70 cities tracked by the statistics bureau, at a pace that exceeded the previous month.

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