Mortgage lending gets more flexible

China's commercial banks are gaining more room in pricing and risk valuation in mortgage lending, the country's top financial regulators said on Friday.

"Mortgage lending should be further encouraged, as it remains quite safe compared with corperate lending," said Zhou Xiaochuan, governor of the People's Bank of China, at the conference held by the Institute of International Finance in conjunction with the G20 Finance Ministers and Central Bank Governors Meeting.

Zhou said individual mortgage loans in China account only for between 10 percent and 20 percent of total banking loans, "much lower than in some countries, where the ratio is between 40 percent and 50 percent".

The recent move to ease credit terms in mortgage lending does lead to increased leverage, he said, but its leakage into the overall economy remains small.

In response to recent concerns that China's ratio of debt to its economic size has been climbing, Zhou said the main problems don't stem from mortgage lending.

"China should focus more on resolving the problem of high corporate leverage," said Zhou.

The People's Bank of China and the China Banking Regulatory Commission announced this month that the minimum down payment for first-time homebuyers in some regions was being reduced from 25 percent to 20 percent, just five months after the authorities dropped the rate from 30 percent to 25 percent. Down payments required for second homes have been lowered from 40 percent to 30 percent.

Zhou said a more efficient regulation system should be established to better evaluate the performances of banks, when they are given more flexibility to evaluate risks and pricing for different clients.

Industry specialists said the governor sent positive signals to banks to speed up the granting of home loans and to set mortgage rates at reasonable levels.

"The governor alleviates the concerns of commercial banks to loosen credit policies for homebuyers," said Yan Yuejin, a researcher at E-house China R&D Institute. "Banks in some regions are likely to further cut interest rates and lower the down payment to, say, 15 percent."

However, Zhang Dawei, chief market analyst at Zhongyuan Real Estate Co, pointed out that a loosening of policies should operate under a prudent framework and "adjustments to the proportion of down payment should be used as tools", at a time when official data show more than half of surveyed major cities reporting month-on-month rises in new home prices in January.

New-home prices in Shenzhen, Guangdong province, increased in January by 52.7 percent year-on-year, according to the National Bureau of Statistics.