- Banks told to step up scrutiny of down-payment sources
- Shenzhen home prices surging at fastest pace in China
China’s central bank called officials from the nation’s biggest commercial lenders to a meeting in the southern city of Shenzhen last week to stress a close adherence to rules on mortgage lending, people familiar with the matter said.
The People’s Bank of China told lenders not to compete excessively on mortgages, said the people, who asked not to be identified as they aren’t authorized to speak publicly. Banks were also requested to step up their scrutiny on the source of borrowers’ down payments, the people said.
The meeting came as Shenzhen, located in the province of Guangdong that borders Hong Kong, experiences the biggest boom in residential home prices in China, with prices rising 52 percent in January from a year earlier. Concerns are rising about risks in loan markets amid warnings from officials that housing prices in some top-tier cities are climbing too fast.
Chinese authorities are mulling plans to impose rules ending the practice of home buyers taking out loans to cover down-payments, people familiar with the matter said last week. Regulators including the PBOC and the China Banking Regulatory Commission will also ask commercial banks to scrutinize mortgage applications and reject those where down-payments come from loans offered by such institutions, the people said at the time.
Central bank Deputy Governor Pan Gongsheng said on Saturday loans from developers, real estate agents and peer-to-peer lenders have raised home buyers’ leverage, undermined the effectiveness of macro policies and increased risks to the financial system and property markets. The regulators will soon start a campaign against such activities, he said.
The PBOC’s press office didn’t immediately respond to a faxed request for comment about last week’s meeting.
— With assistance by Heng Xie, and Jun Luo