Banks end discounts for first home buyers in Beijing

Many banks in the Chinese cities of Shanghai, Beijing and Shenzhen have stopped offering discounts on mortgage loans for first-time home buyers, China Securities Journal reported.
Industrial and Commercial Bank of China Ltd., China Construction Bank Corp., and Shanghai Pudong Development Bank Co. have stopped offering such discounts, according to the report.
Banks ordered their branches in Beijing to drop a 15 percent discount and issue home loans at benchmark lending rates after the Chinese New Year holiday, according to the newspaper.
The central government has taken a slew of tightening measures since 2009 to rein in sky-high property prices, including increasing down payments and mortgage rates for buyers of second and subsequent homes.
The down payment minimum for second homes in China is 60 percent of the total value of the property, and banks must charge a minimum mortgage rate of 1.1 times the benchmark lending rate.
China's central bank raised its benchmark interest rates for the third time in four months on Feb. 8, and economists expect further rate hikes later in the year as the government seeks to rein in inflationary pressure.
Chinese banks have some flexibility when it comes to setting the rates they charge based on their assessment of credit risk, and some have been offering first-time home buyers discounted mortgage rates of 0.85-0.95 times benchmark lending rates, according to the report.
Some lenders have stopped issuing loans to first-time home buyers altogether after the recent interest rate hike and lending cuts limited the amount of loans banks can extend, according to the newspaper, which failed to cite sources.
Late last month, China's State Council announced new property tightening measures, such as higher down payments for second home purchases, and limits on home purchases in certain cities to rein in stubbornly high property prices.