Money

Beijing banks skirt rules with cheap mortgages

(Agencies)
Updated: 2011-01-06 13:09
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BEIJING - Some bank branches in Beijing have started to offer large discounts on mortgages to their clients, quietly skirting the government's instructions that mortgage rates should be no less than 85 percent of benchmark rates, a local newspaper reported on Thursday.

Like other municipalities in China, Beijing has informally ordered banks to charge higher mortgage rates as part of its efforts to rein in housing prices and to discourage the accumulation of debt in the property sector.

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But banks are eager for a larger slice of the residential mortgage market because of its relatively low risk.

The Beijing News reported that branches of Bank of Communications had started to offer 25-30 percent discounts on net benchmark rates to wealthy clients.

Some outlets of China Construction Bank have also started to offer discount mortgages if homebuyers pay a 40 percent downpayment, it added.

The tug-of-war between property developers and regulators threatens to undermine the Chinese government's battle to rein in housing inflation. With signs that housing prices are beginning to pick up again, Premier Wen Jiabao said late last month that he was not satisfied yet with the results of the government's property tightening measures.