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Mortgage rates for first-time buyers inch up

(China Daily)

09:38, October 19, 2011

SHANGHAI - Some Chinese banks have raised mortgage rates for first-time home buyers, local media reported, a move analysts say will dampen property prices, which one industry surveys says have just posted their first monthly decline in a year.

China Construction Bank Corp, China's biggest mortgage lender by assets, raised rates for first homes in Beijing to 1.05 times the central bank's benchmark lending rate, Xinhua News Agency reported. China Everbright Co raised its rate in Shanghai to the same level, according to Economic Information Daily.

The benchmark interest rate for loans of more than five years is 7.05 percent.

The Legal Evening News reported that banks in 14 Chinese cities have raised mortgage rates for first-time buyers by at least 5 percent. In Changchun, Jilin province, some banks raised their rate by up to 50 percent, according to the newspaper.

Zhang Hongwei, an analyst with Tong Ce Real Estate Co Ltd, a property consultancy, said the higher mortgage rates will dampen already low trading volume and force developers to further lower prices to keep their businesses running.

"It's definitely bad news for developers," he said.

"Home prices will go down over the next three months, though in the long term, I am still bullish on the property market."

In September, national home prices fell 0.03 percent, according to SouFun Holdings Ltd, as a result of the central government's measures to deflate the property bubble.

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