China's central bank considers lower Shanghai mortgage loan targets for banks

BEIJING (Reuters) - China’s central bank is considering lowering commercial banks’ annual loan targets for Shanghai mortgage lending to fit with now-tumbling demand after the city imposed measures to cool its over-heated housing market, three sources told Reuters.

A Chinese national flag flies at the headquarters of the People's Bank of China, the country's central bank, in Beijing, China, January 19, 2016. REUTERS/Kim Kyung-Hoon

The People’s Bank of China’s (PBOC) Shanghai branch has sent banks a notice querying the amount of mortgage loans granted after the municipal government rolled out cooling measures one month ago, the people knowledgeable about it said on Thursday.

The central bank’s Shanghai branch did not comment immediately when contacted by Reuters.

The queries on loan levels reflect how sharply the Shanghai mortgage-lending business has changed this year.

Early this year, Shanghai home prices surged. In March, they were 25 percent higher than a year earlier, according to the National Statistics Bureau.

On March 25, the municipal government announced tighter downpayment requirements for second home purchases and made it harder for non-residents to buy homes in Shanghai.

Home sales tumbled sharply in the week after authorities made it harder to buy homes.

Given the fall, commercial banks are worried they will not be able to reach their 2016 mortgage loan targets, the sources said.

One of them, who works with retail loans at a commercial bank in Shanghai, said the lender is still working to meet the target set at the start of the year.

“We’re under pressure to accomplish the task. I’m not very confident we will reach the target,” the person said.

Reporting by Li Zheng and Nicholas Heath; Writing by Winni Zhou; Editing by Richard Borsuk