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Economy

First-time buyers face pricier mortgages

1
2018-05-08 10:44China Daily Editor: Li Yan ECNS App Download

Although a number of banks in Beijing have raised home loan rates for first-time buyers to stabilize the market, experts said there should be no cause for alarm among potential buyers.

A number of banks in Beijing have decided to set the home loan rate to 10 percent above the benchmark of 4.9 percent.

Most banks will start the new mortgage interest rates this week, while the loan rate for second home purchase remains unchanged, which is 20 percent above the benchmark.

The banks set to raise the home loan rate for first-time buyers include the Big Four-Bank of China, China Construction Bank, Industrial and Commercial Bank of China, and Agricultural Bank of China-as well as others such as China Merchants Bank, Bank of Beijing and China Guangfa Bank, according to reports by Securities Times and Beijing Youth Daily.

"Take a one-million-yuan ($157,230) 25-year loan as an example. With the new loan interest rate of 5.39 percent, the lender will need to pay an additional 43,000 yuan," said Zhang Dawei, the chief analyst with Centaline Group.

"The rising loan rate will have a considerable impact on the property market," said Zhang, predicting that the property market will keep cooling as banks tighten their housing loan policies.

Yan Yuejin, a researcher with E-house China Research and Development Institute, said the potential buyers with rigid demand don't need to worry too much over the interest rate increase.

"The reason behind the interest rate rise is due to the shortage of capital and the banks' profit capability," Yan said.

"As the central bank is enforcing tighter asset management regulation, many highly profitable investment products are being canceled. Therefore, banks need to find a new source of profit such as housing loans."

"From the property regulation point of view, the interest raise is also part of action to curb speculation," he said. "But it does not mean the banks don't welcome the demand from house buyers. The housing loan business will see some movement in the next half year, so the buyers with rigid demand don't need to panic over the interest rate rise. "

  

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