A number of banks in Shenzhen have scrapped interest rate discounts for housing mortgages as property prices continue to rise and more government measures are expected to rein in the property market.
They included Huaxia Bank, China Everbright Bank, Shenzhen Development Bank and China Minsheng Bank, a Daily Sunshine report said. The banks said they would start charging interest on mortgages for first-home buyers based on the benchmark annual interest rate set by the central bank without discounts.
Scrapping the discounts is equivalent to four interest rate increases and is bound to increase the burden on homebuyers, analysts say.
Exceptions would apply only to quality clients who could still have a 15-percent discount on housing loan interest rates, said a manager of an Industrial Bank outlet in Luohu District. Quality clients refer to those who have gross assets at the bank of more than 1 million yuan (US$151,900).
Although some banks including Bank of China, China Construction Bank, Bank of Communications, China Merchants Bank and Agricultural Bank of China still offered preferential rates, they had been reduced from 15 percent to no more than 10 percent.
The central bank recently raised the bank reserve ratio by half a percentage point, leaving many banks with little loan capacity. Homebuyers need to act quickly because even a 5-percent discount might not be available next week, said a China Merchants Bank manager surnamed Huang.
An Agricultural Bank of China Shenzhen Branch manager said reducing or scrapping discounts on housing loan interest rates was inevitable. The CPI is expected to remain high in the first half of this year, which will prompt the central bank to further raise interest rates for bank deposits. If discounts are continued, bank profit margins will decrease.
