Banks lower down payment for second-home buyers

Banks are starting to lower down payment requirement for some second-home buyers to get in line with the latest lending rules, although the reduction in mortgage rate is only modest, said the 21st Century Business Herald on Thursday.

Several banks in Beijing, Shenzhen and Zhejiang province have decided to attract customers by offering a mortgage rate equal to 90 or 95 percent of the benchmark rate, though according to the guidance, it can be reduced to as low as 70 percent.

People's Bank of China, the central bank, and the China Banking Regulatory Commission announced on Sept 30 that Chinese citizens who wish to buy a second home and have no extending mortgage can enjoy the same 30 percent down payment required of first-time home buyers.

Prior to the announcement, second-home buyers were required to place a minimum of 60 percent down payment and their mortgage rate was above 1.1 times of the benchmark rate.

Corporate banks, including Industrial Bank, China Merchants Bank and Everbright Bank, have implemented the new lending rules and opened doors to second-home buyers, said the newspaper.

"The mortgage price is linked to the lending (default) risk. It will be up to each bank’s operating strategy and specific conditions of their customers," said a retail banker in charge of mortgage business to the newspaper.

Recent easing is aimed at boosting the sluggish housing demand as more cities reported month-on-month price drops in August. Government data showed out of 70 major Chinese cities, new homes in 68 saw month-on-month price decline in August, compared with 64 in July.

Only five out of the 46 Chinese cities, namely Beijing, Shanghai, Guangzhou, Shenzhen and Sanya, still impose home purchase limit, a measure taken in 2011 to cool off the then heated property market.

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