Ultra-Easy Home Loan Policy Raises Eyebrows

A Chinese city has announced one of the laxest mortgage policies among local governments this year in the hope of shoring up weak housing sales. But some analysts have warned it carries risks for lenders.

The branch of Huaxia Bank Co. Ltd. in Wenzhou, East China’s Zhejiang province, will allow certain homebuyers to repay only their mortgage interest in the first three years, saying they can begin to repay the principal starting in the fourth year, according to a statement this week from the local government which has signed an agreement with the bank.