More banks to tighten home loans

More banks are joining the Bank of China in tightening policies for first home mortgages to curb risks. The byproduct is that small and medium-sized banks become more competitive.

China Construction Bank says first home mortgage applicants will still enjoy the 30 percent rate discount, but the down payment is being raised from 20 percent to 40 percent. The Industrial and Commercial Bank of China is also raising the down payment requirement, increasing it to 30 percent.

Li Wenjie, Deputy Chairman of Beijing Real Estate Agency Association, said, ""Some big banks including China Construction Bank, Industrial and Commercial Bank of China have used up all loan quota for January. But some small and medium banks have not use much of quota. "

January has seen a big surge in loans with over one trillion yuan are issued. Insiders say some big banks have to raise the loan requirement as they plan to reduce loans in later months. That will give small and medium banks a chance to win a larger market share.

Li Wenjie said, "In fact we see some big banks are tightening loan policies, but some small and medium banks still offer preferential policies on loans for first home and even some second homes. Amid the adjustment of credit control, customers may move from big banks to small and medium banks."

Insiders also point out that higher requirements for a mortgage may affect home buyers purchase plans.

Insiders say that a tightening of requirements by banks will more see would-be house buyers taking a wait-and-see attitude.