* C.bank tells banks to relax mortgage lending-sources
* Tight mortgages contribute to weak housing market
* No formal policy from PBOC, just "window guidance"
* Banks may ignore c.bank's plea
(Adds data, banker doubts on impact)
By Heng Xie and Hongmei Zhao
BEIJING/HONG KONG, May 13 China's central bank
has asked commercial banks to speed up the granting of home
loans and to set mortgage rates at reasonable levels, four
sources told Reuters on Tuesday, underlining its efforts to
support the flagging property market as the economy cools.
But bankers also expressed doubt that such so-called "window
guidance" from the central bank would have a significant impact
on bank lending practices.
The People's Bank of China (PBOC) made the request for
greater mortgage lending at a meeting with commercial banks on
Monday, the sources said.
Tight mortgages are considered one of the reasons for the
cooling of property market this year, as banks have raised home
loan rates for first-time buyers or delayed the granting of
mortgages because of tighter liquidity.
The central bank was not available for comment.
"Loans to real estate developers are still restricted, and
regulators won't easily loosen their grip," said a banker with
direct knowledge of the central bank's guidance.
"But for mortgages - especially mortgages for first-time
buyers - policy is supportive. The central bank has consistently
mentioned this in reports. Re-emphasizing it now is common
Shanghai-listed property shares closed 0.9 percent
higher on Friday compared to a 0.1 percent fall in the broader
Shanghai Composite Index. But some bankers said the
central bank's exhortations may have little impact.
"It was just oral guidance. There wasn't any formal
document. We won't adjust our current policy towards real estate
and mortgages. I believe all the other banks also won't reduce
the price on mortgage loans," said an executive at a mid-sized
Such guidance runs counter to the broader trend toward
liberalising interest rates and letting market forces determine
resource allocation, he said.
"Regulators can't crack the whip on interest-rate
liberalisation on the one hand, then on the other hand use all
sorts of administrative measures to interfere with commercial
banks' own business strategies. Banks are market-ized now.
Profit presssure is heavy," said the mid-sized bank executive.
China's home prices rose at double-digit rates in most
cities last year, but the market has shown signs of cooling
since late 2013 as authorities clamped down on property
speculation and banks made it harder for home buyers and small
developers to get loans.
Data released on Tuesday showed that property investment
slowed in April, while housing sales fell on a year-on-year
Home mortgage interest rates ticked hit 6.70 percent in the
first quarter this year, up 17 basis points from the fourth
quarter of 2013, the PBOC's latest monetary policy report
Nearly 90 percent of bank mortgages were set at rates 5 to
10 percent above the PBOC's benchmark personal mortgage rate,
according to a survey of 69 bank branches in 22 cities earlier
this year. Some banks were offering mortgages at premiums of up
to 20 percent.
The PBOC's benchmark for home mortgage loans with a maturity
above five years is currently set at 4.50
percent, but banks are allowed to offer mortgages at variable
rates up to 30 percent lower.
Some banks were also pressuring mortgage loan applicants to
deposit funds with the bank or to buy wealth management
products, otherwise they would face lengthy processing delays or
elevated interest rates, according to Rong360.com, a data
provider on retail finance.
Chinese banks are facing restrictions on loan growth from
slowing deposit growth and tighter capital adequacy
Forcing customers to make deposits helps banks expand
lending without exceeding the maximum 75 percent loan-to-deposit
ration. Wealth management products enable banks to preserve
capital by shifting some loans off-balance-sheet.
(Writing by Gabriel Wildau; Editing by Kim Coghill)