Central bank tells lenders to rein in property loans

(Agencies)
Updated: 2007-12-18 14:18

The People's Bank of China has urged the country's commercial banks to strictly enforce regulations designed to tighten credit in the property market.

"Commercial banks should draw up detailed regulations and implement them as soon as possible in accordance with the recent circulars regarding lending in the property market," the central bank said in a statement posted on its website.

Special Coverage:
Housing in China

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The central bank and the China Banking Regulatory Commission said recently that the rate on mortgage loans for second homes and on commercial real estate should be at least 1.1 times the benchmark lending rate, while the identification of second homes for mortgage loans should be based on households instead of individuals.

The central bank also said affordable and low-rent housing has to be developed faster to ensure adequate supply.

Financial innovation in the sector is to be encouraged despite the credit crisis in the US, it added.

Mortgage securitization as a way for banks to share the risks of property lending with other investors has only recently begun in China. Risky securitization, especially of subprime loans, is one of the factors blamed for the liquidity crisis that has seized international credit markets.


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