Mortgage Rates

Rise in mortgage charges anticipated to tame costs


A real estate agent (left) answers inquiries from potential homebuyers at a shopping mall in Shanghai on August 1. [Photo by Lyu Liang/For China Daily]

The rise in home mortgage rates will adequately dampen rising house prices and reduce risks, but local policy makers should be aware of protecting first-time buyers, experts say.

A report from the Beike Research Institute found that residential mortgage rates in the country’s 72 cities rose 6 basis points for first and second purchases, reaching 5.47 percent and 5.73 percent, respectively.

Up to 26 cities monitored by the institute raised mortgage rates for first homes and 23 cities raised rates for second home purchases in May.

The five-year key rate, on which many lenders base their mortgage rates, remained unchanged from the previous value of 4.65 percent.

Home mortgage rates have reversed the downtrend since November and are approaching March and April 2020 levels, the report said.

The four largest banks in Guangzhou, Guangdong Province adjusted mortgage rates in May, with the lowest rate being 5.4 percent for first-time buyers and 5.6 percent for those who already own a property.

“This is the third time this year the four major Guangzhou banks have raised their mortgage rates and other commercial banks have followed suit,” a real estate agent in Guangzhou’s Huangpu District told Xinhua News Agency.

In Shenzhen, Guangdong, the city’s mortgage rate for first-time home buyers reached 5.1 percent, while it rose to 5.6 percent for second home buyers.

Home buyers also face tighter lines of credit and longer waiting times to obtain credit, which are a by-product of the interest rate hike. As a result, cities that announced higher mortgage rates saw their used home transaction volume decline last month, said Xu Xiaole, senior market analyst at the Beike Research Institute.

Yan Yuejin, director of Shanghai-based E-house China Research and Development Institution, felt an annoying difference between recent mortgage rates and last year’s.

“Commercial banks are becoming more proactive this year to ensure houses are residential rather than speculative. They are taking steps to stabilize the housing market,” said Yan.

Experts assume that mortgage rates will continue to rise.

Chen Sheng, president of China Real Estate Data Academy, suggested introducing a points-based system to prioritize home buyers who urgently need apartments to live.

“Some might argue that the rise in aggregate interest rates could increase the cost of buying a home,” Chen said. “But I think differently because there will be discounts for first-time buyers, which we always do.”

Lending to China’s real estate sector grew more slowly in the first quarter of the year as the country maintained strict rules on home purchases, according to the People’s Bank of China. China’s outstanding individual mortgage loans rose 14.5 percent year-on-year to 35.7 trillion yuan ($ 5.1 trillion) by the end of March.