Chinese banks halt mortgage lending after reaching 1st quarter quota on new loans: report
Some Chinese banks have halted mortgage lending to home buyers in major cities, as they have exhausted quarterly credit quotas imposed by the central bank, according to a report.
A quota system on mortgage loans was introduced on the mainland as part of a broader effort to arrest China’s runaway home prices.
Commercial banks were ordered by the People’s Bank of China in late January to cap mortgage issuance for the first quarter at a level no higher than the mortgage issuance in October to December. The new rules also stipulate that monthly mortgage loan growth cannot exceed the average growth in mortgage lending during the fourth quarter, sources at major banks in Beijing told the Post.
Industrial & Commercial Bank of China, Bank of China, and Everbright Bank Co, have used up their allocated quotas, according to a report by Caixin on Thursday, which said property agents in Beijing have temporarily halted their cooperation with these financial institutions.
However, a banker with China Minsheng Bank’s household credit department, who declined to be named, said her bank had not used up the first quarter’s quota and was still able to lend.
She said that mortgage lending at her institution had has significantly slowed since February.
Meanwhile, mortgage growth has been on a cooling trend since November, resulting in relatively tepid new credit growth in the fourth quarter, offering a low comparison base for the first quarter.
The policy on mortgage lending for the second quarter has not been set, but a major shift is unlikely given the overarching policy that total mortgage growth for 2017 could not exceed that of 2016, she said.
Outstanding household medium-to-long term loans, an equivalent of mortgage loans, grew by 380.4 billion yuan in February (US$55.17 billion), a drop from the 629.3 billion yuan growth in January, and the lowest mortgage growth since March 2016, according to PBOC data.
Home sales by volume for the first two months of this year were up 26 per cent year-on-year, reflecting a sharp slowdown from 34.8 per cent growth for 2016, according to the National Bureau of Statistics. Sales in value terms grew 25.1 per cent in the first two months on year, picking up from 22.5 per cent in 2016, suggesting home prices continue to shoot higher. However, fund raising by developers grew 7 per cent in the first two months, cooling from a 15.2 per cent expansion in the previous 12 months.
Asked about the policy outlook last week, PBOC governor Zhou Xiaochuan said mortgages will grow at a “relatively fast” pace, but cautioned of the need for “balance”. The speed will slow accordingly as the housing policy adjusts, he said.
Commercial banks are also believed to have slowed new mortgage issuance owing to their own commercial concerns, such as the money rate and compliance with the loan to deposit ratio requirement.