Shanghai banks getting tough on mortgage requests
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More banks in Shanghai have halted third home mortgages while a stress test on a price slump is in the running as China beefs up risk control on home loans.
The China Banking Regulatory Commission ordered banks in some areas to run a stress test to gauge the impact of a 50 percent fall in housing prices, according to sources who refused to be identified.
A test at 50 percent doesn't necessarily mean regulators are expecting such a sharp fall but it does mean they are showing banks they should be prepared for a worst case scenario, the sources said.
The stress test could be as much as 60 percent, Bloomberg reported yesterday.
China's regulators have been tightening the screws on mortgage lending to curb property speculations since April.
Banks must ask for a higher down payments and higher interest rates on second or more homes.
Banks can also stop third home loans in cities where home prices have soared too fast or too high.
Banks, once reluctant to squeeze the most lucrative part of their retail operations, are now adopting the new lending rules.
Lenders, including the Industrial and Commercial Bank of China, the Bank of Communications and the Bank of China, joined rivals to halt third-home loan approvals in Shanghai, credit officers said yesterday.
Standard Chartered Bank, DBS, HSBC had already suspended third-home loans since April. But overseas lenders are small players in the mortgage market.
"We don't offer third-home mortgages any longer," said a Bank of Communications credit officer. "Mortgage loan policy now is really tight."
Chinese regulators showed how serious they were about getting tough home loans by reiterating the rules several times in July and August, warning that severe punishment would follow if banks dragged their feet in adopting the new measures.
