Mortgage policies easing to help boost lending

Commercial banks are expected to see a surge in their lending business and profits, after the government decided to relax the mortgage policies further on Monday, experts said.

"Banks are likely to pass on the discounts to buyers. The mortgage policy relaxation will boost the lending business of banks, as the demand for housing mortgage loans will go up," said Li Peijia, a researcher with the Institute of International Finance at Bank of China Ltd.

"House purchases and financing options for individual needs were not that well-catered to in the earlier regulations. The easier policies will prompt a new group of customers who were unable to purchase second homes before to borrow from banks."

Commercial banks can lower the down payment requirements for buyers of second homes to 40 percent from 60 percent, according to the announcement made by People's Bank of China, along with the China Banking Regulatory Commission and the Ministry of Housing and Urban-Rural Development.

For households who have applied for mortgages through the Housing Provident Fund, the required down payment for first-time buyers has been revised to 20 percent. For second-time buyers without outstanding mortgages on their first homes, the required down payment is now set at 30 percent from 60 percent earlier.

"Though the measures will help increase the lending business of banks, the growth will not be that significant. Banks will strengthen support to other related sectors and the personal loan business, with an eye on the growth potential in the property market," Li said.

When it comes to the risks for banks, the ratio of bad mortgage loans to total loans are generally low, and banks are unlikely to see any growth in the risks from an increase in lending activities, she said.

Economists expect the central bank to continue with targeted measures to lift the property market, and release more favorable property policies to fine-tune the economy.

Zhu Haibin, chief economist of JP Morgan China, said: "The announcement is another step to stabilize the overall economy. We expect the housing market correction to continue, but at a relatively modest pace through the course of this year."

Li Li, a researcher with Rong360.com, a financial information provider, said: "Banks are likely to come out with more loan options for second-time buyers, as this category borrowers have better credit standing and repayment ability."