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Shanghai Banks Raise Rates for First-Time Homebuyers

By Han Yi and Dong Tongjian

(Shanghai) — Most commercial banks in Shanghai have raised interest rates on housing loans for first-time buyers in the past month, but China’s big five lenders in the municipality haven’t followed suit, bankers from multiple lenders told Caixin.

Apart from the five big state-owned banks — the Bank of China, Commercial and Industrial Bank of China, Agricultural Bank of China, China Construction Bank, and Bank of Communications — most lenders in Shanghai have lowered their discounts on the central bank’s long-term benchmark lending rate from 10% to 5%. The rate currently is 4.9% for loans with a maturity of more than five years, a banker responsible for granting housing loans at a big lender in Shanghai told Caixin.

It is still uncertain whether the big state-owned banks will do likewise, the banker said. “Our local branches in Shanghai have not received any notice from headquarters” regarding an interest rate increase, said a banker in charge of retail banking services at a state-owned lender.

The average interest rate for first-time homebuyers was 4.52% in April in cities around China, up from 4.49% from a year earlier and the fourth consecutive monthly rate hike since January, according to data from Rong360.com, a Chinese aggregator of financing and loan services.

A risk control manager at a commercial lender told Caixin that the recent rate increase is due to tightened market liquidity. Increasing bond yields will drive up interest rates on housing mortgage loans, said Xu Xiaoqing, chief macroeconomist at DH Fund Management Co. Ltd. He said there is still room for market rates to go up, and that current lending rates are still relatively low.

Other analysts suggest the higher interest rates indicate further attempts to restrain the property market. But the housing market in Shanghai appears to have already cooled after the introduction of a series of measures since November that included raising the minimum-required down payment. Data from Lianjia Real Estate Co. Ltd, a real estate agency, showed that about 22,200 previously owned apartments were sold in March in Shanghai, down by 59.3% from the same period a year earlier.

Contact reporter Dong Tongjian (tongjiandong@caixin.com)

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