Categorized | International

Chinese Banks Raise Mortgage Rates

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Two major banks in China have decided to raise their mortgage loan interest rates following the first property price decline this year. Both China Construction Bank Corp. and China Everbright Co. increased their rates by 1.05 over the standard rate of 7.05 percent.

The increase does not come as a complete surprise, as China has demanded that banks increase the amount of money they lend to small businesses. As such, there is less money for potential homebuyers. One of the easiest ways for the banks to limit lending intended for the purchase of homes.

Furthermore, Chinese real estate analysts believe that the current mortgage rate is fairly low by today’s standards, and thus had room to increase without being overly detrimental. Other analysts, however, believe that increased rates could be harmful to the economy as a whole. Some analysts are saying that the practice of tightening lending for first time homebuyers could slow the economy down to the point that it reaches new lows.

Last month marked the first time in over a year that housing prices experienced a decline. The Chinese government has been targeting the real estate market with various measures so as to prevent a speculative bubble similar to that which crippled the United States economy.

The recent decline in property prices in China shows the decisions made by the government are working, albeit moderately. There is no clear indication as to whether the results of their restrictions will work in the long term. The Chinese government has most recent raised the minimum down payment for second-home mortgages.

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About Nancy Raven

Nancy is the main writer for the International section of the website. Sometimes she also helps Drew out on the Finance/Mortgage section as well.

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