Beijing shortens mortgage terms for city’s second-home borrowers

Beijing’s government has shortened the mortgage duration of second-home borrowers domiciled in the city, taking another step to clamp down on speculative home buying and control runaway prices.

Buyers who already own one residential property are now only eligible to take out a mortgage on a second home for no more than 25 years, cutting back the loan period from the previous 30 years, according to several agents in the city.

Agents at 5i5j and Homelink, two of the largest property sales platforms in the city, said the new policy had been in place since Wednesday, and applies to all second-home buyers. The policy has been implemented following so-called “window guidance” -- a kind of moral suasion -- by the Chinese central bank to the city’s commercial banks, with little fanfare or official announcement.

The shorter term duration follows another move by several commercial banks to delay the draw down of bank credits on mortgage loans, also as the result of the central bank’s suasion to limit lending to property speculators.

The latest policy adds to the repayment burden for second-home borrowers. The monthly repayment on a 3-million yuan (US$436,230) mortgage loan will increase to 18,226 yuan over a 25 year period, from 16,827 yuan over a 30-year period.

Home buyers must also put down more money as down payment, as current regulations cap monthly mortgage repayments at half of the borrower’s monthly income. The minimum down payment ratio has been raised to 70 per cent since October 1 for the typical second-home buyer in Beijing.

The new curb also includes a requirement that mortgage rate discounts for first-time homebuyers should be no higher than 10 per cent of the benchmark rate.

However, the effect should be muted because a discount of more than 10 per cent has been long gone since October, according to the 5i5j agent.