Experts urge differential mortgage policy

Experts called for a change in the current mortgage policy in order to facilitate housing demand from individuals as well as curtail speculation, after earlier reports that the central bank decided to relax mortgage lending.

Zeng Gang, researcher at the Institute of Finance and Banking at the Chinese Academy of Social Sciences, said easing lending policies has become a trend as the once-rampant home market has already showed signs of cooling in recent months.

Government data revealed more cities reported month-on-month price drops in August as new homes in 68 saw month-on-month price declines out of 70 major Chinese cities surveyed, compared with 64 in July.

Lian Ping, chief economist with the Bank of Communications, believed policy makers should properly adjust the old restrictive measures as housing stocks pile up and demand cannot be satisfied.

"The current mortgage lending policy was used to rein in the property market a few years ago when prices were rocketing with increasing bubbles," Lian added, suggesting it is lagging behind at present.

China's anti-speculation purchase restrictions, while preventing bubbles, may have "hurt" buyers who truly need a home, Zeng added.

Their remarks came after Chinese media reports said that the central bank asked the four big commercial banks to relax their mortgage rules, which will require a lower down payment on the purchase of a second home amid the sluggish property market.

The original rule stated that any buyer of a second home, with or without mortgage, has to pay a minimum down payment of 60 percent and be charged a mortgage loan rate at 10 percent or more above the benchmark lending rate.

The new rule is said to relax this definition. If the mortgage of a previous home has been fully repaid, the new purchase and new mortgage may be treated as a first mortgage, which requires a lower down payment, 30 percent, and is charged a lower rate, at or with a small discount to the benchmark.

The central bank has not made any comment on the reports. However, some local governments have implemented similar measures.

Officials of Fuzhou, capital city of east China's Fujian Province, said locals will be regarded as first-time home buyers if they have paid back loans for their previous home. Two cities, Nanjing and Hangzhou, as well as central China's Hubei Province, implemented a similar policy shortly after.

Though the central bank has not made any announcement, two of China's four major banks have given ambiguous responses to the media reports.

The Industrial and Commercial Bank of China (ICBC), the country's largest bank, and the China Construction Bank (CCB) both said they support individual's demand for mortgage but avoided commenting on the murmurs of relaxed mortgaged lending.

Without giving a direct answer, an ICBC official said "we seriously implement the country's policy directions concerning the housing market, and we have been actively supporting the rational demand of personal housing and property development," according to the official China Securities Journal.

The CCB likewise told Xinhua that the bank has always been backing individual mortgage and will continue to support residents to improve their living conditions.

In addition, the CCB advised accelerating the establishment of a differential policy on home loans that will restrain speculative investment but support home purchase to improve living conditions.

"The ICBC is closely watching the changes in the property market and adjustments in related policies. We will timely take follow-up actions for relevant credit policies and continuously improve correspondent financial services," the ICBC added.

The four banks are to announce new rules which will ease the mortgage policies, the official Shanghai Securities Journal reported earlier on Tuesday, citing unconfirmed sources.