China's central bank launched a set of tightened mortgage rules on Friday, the government's latest effort to curb speculative home-buying in Beijing and cool down the red-hot real estate market.
To target faked divorces, Beijing housing mortgage applicants who have been divorced for less than one year will be regarded as second-home buyers, rather than first-home buyers, and therefore will have to pay more down payment and a higher mortgage rate, according to a statement released by the People's Bank of China.
Moreover, there will be stricter investigation of the sources of the down payment, to ban leveraging financial products, and of applicants' ability to pay back the loans. Additionally, real estate agents should not offer illegal housing financing tools like down payment loans, the statement said.
According to Guo Yi, marketing director of real estate consultancy Yahao, the policy closes a loophole, since many couples get a divorce solely to buy another property under favorable first-home policies for investment purposes, but their financial ability is not strong enough to pay back the mortgages.
"Such measures will help to reduce banks' potential risks and consolidate the power of previous limitation policies," said Guo.
Beijing just expanded the range of second property buyers to those who have loan records in or outside Beijing, even though they've paid off their previous mortgage. And the down payment requirement for buyers of a second home were raised to from 50 to 60 percent of the full price.
"But whether such policies will lead to a home price drop won't be known until April, since the market needs time to digest the news," Guo said.
However, the latest round of tightening measures apparently has already helped to cool down the market.
Xia Di, a brokerage agent with a HomeLink outlet, said the number of potential buyers visiting his outlet has dropped and more home sellers are willing to accept a bargain price or even lower their selling price if they need money badly.
"We haven't seen a deal yet after the municipal government rolled out a slew of tightening measures this week, as most clients take a wait-and-see attitude," said Xia. Before that, two to three deals were closed each week.