People's Bank of China tells banks to quicken mortgage lending

BEIJING/HONG KONG: China's central bank has asked commercial banks to speed up the granting of home loans and to set mortgage rates at reasonable levels, four sources told Reuters on Tuesday, underlining its efforts to support the cooling property market.

The sources said the People's Bank of China (PBOC) made the request at a meeting with some commercial banks on Monday.

Tight mortgages are considered one of the reasons for the cooling of property market this year, as banks have raised home loan rates for first-time buyers or delayed the granting of mortgages because of tighter liquidity.

The central bank was not available for comment.

"Loans to real estate developers are still restricted, and regulators won't easily loosen their grip," said a banker with direct knowledge of the central bank's guidance.

"But for mortgages - especially mortgages for first-time buyers - policy is supportive. The central bank has consistently mentioned this in reports. Re-emphasizing it now is common sense."

China's home prices rose at double-digit rates in most cities last year, but the market has shown signs of cooling since late 2013 as authorities clamped down on property speculation and banks made it harder for home buyers and small developers to get loans.

Nearly 90 per cent of bank mortgages were set at rates 5 to 10 per cent above the PBOC's benchmark personal mortgage rate, according to a survey of 69 bank branches in 22 cities earlier this year. Some banks were offering mortgages at premiums of up to 20 per cent.

The PBOC's benchmark for home mortgage loans with a maturity above five years is currently set at 4.50 per cent, but banks are allowed to offer mortgages at variable rates up to 30 per cent lower.

Some banks were also pressuring mortgage loan applicants to deposit funds with the bank or to buy wealth management products, otherwise they would face lengthy processing delays or elevated interest rates, according to Rong360.com, a data provider on retail finance.

Chinese banks are facing restrictions on loan growth from slowing deposit growth and tighter capital adequacy requirements. Forcing customers to make deposits helps banks expand lending without exceeding the maximum 75 per cent loan-to-deposit ration. Wealth management products enable banks to preserve capital by shifting some loans off-balance-sheet