“…led by Liu Shiyu, a vice governor of the People’s Bank of China, central-bank officials discussed mortgage-lending policies with executives from 15 major banks….China’s central bank asked the nation’s major lenders to give priority in mortgage lending to first-time home buyers, as concerns increase over the sluggish property market.”, Wall Street Journal, May 14, 2014
“I think this article and recent similar ones discussing the Obama administration’s moves to once-again ease mortgage credit standards…in order to “goose” housing…should leave no doubt that it is our well-intended governments that lead the charge in lowering mortgage lending standards. And why is that? Because housing and other real estate investment (the world wide) drives so much employment and economic activity.”, Mike Perry, former Chairman and CEO, IndyMac Bank
China Pushes for More Home LoansUpdated May 14, 2014 12:56 a.m. ET
China’s central bank asked the nation’s major lenders to give priority in mortgage lending to first-time home buyers, as concerns increase over the sluggish property market.
In a meeting Monday led by Liu Shiyu, a vice governor of the People’s Bank of China, central-bank officials discussed mortgage-lending policies with executives from 15 major banks, according to a statement posted on the central bank’s website Tuesday.
The People’s Bank of China asked the commercial banks to be more efficient in processing mortgage loans to qualified home buyers and to set mortgage rates at “reasonable” levels, according to the statement.
The central bank held the meeting because some banks have halted mortgage lending or raised interest rates for first-time home buyers, people with knowledge of the matter said.
China’s real-estate market, once red-hot, has cooled considerably this year. In the first four months, home sales by value were down 9.9% from the year-earlier period, official data released Tuesday showed.
Housing demand is weakening in more Chinese cities as banks continue to tighten mortgage lending. Sales also are being held back by widespread expectations that property developers, having already reduced prices sharply in some cities, are going to cut further.
The central-bank vice governor asked the banks not to halt mortgage lending despite concerns over the market, according to those familiar with the meeting.
The central bank said in its statement that lenders still need to strengthen supervision of mortgage lending.
People familiar with the meeting said the regulator didn’t mention any plans to extend more credit to property developers, suggesting wariness of across-the-board easing. The central bank’s statement didn’t mention lending to property developers, either.
“The issuing of mortgages has slowed since the second half of last year, and banks are not very active in extending mortgages given the relatively low pricing and their limited loan quota,” said a banker with China Citic Bank in Hangzhou, the capital of the eastern province of Zhejiang.
China sets limits on total bank lending. Bankers said that other types of loans are more lucrative than mortgages.
People in banking said mortgages can carry rates up to about 10% above the official benchmark, while rates on loans to corporate borrowers generally run 20% to 30% above the benchmark.
In an attempt to encourage housing sales, several cities have relaxed restrictions on home purchases. But bankers said the impact will be limited if banks don’t make financing more available to prospective buyers.
As of March 31, central-bank data showed, outstanding mortgage loans extended by Chinese banks came to 10.29 trillion yuan ($1.65 trillion), up 20.1% from a year earlier—an increase that marked a deceleration from the pace of 21% in the fourth quarter.
“If China’s central bank continues to maintain its current policies, it won’t be able to hold back the downward trend in the property market,” said Société Générale economist Yao Wei, adding that Beijing should start to loosen mortgage loans to households.
Ms. Yao said the central bank needs to relax its credit policies covering the property market but may feel constrained by concern about a buildup in debt.
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