Mortgage surge draws central bank attention

THE value of domestic banks' new individual mortgages in the third quarter skyrocketed compared to the first half in Shanghai, the central bank said yesterday.

The "relatively rapid" total new loans growth in Shanghai is likely to post a new high this year on the backdrop that overseas banks are expanding yuan lending while listed Chinese rivals are under the pressure to create more value for shareholders, the People's Bank of China said.

New individual mortgages topped 19.13 billion yuan (US$2.55 billion) in the third quarter at domestic banks in Shanghai, up 12.3 billion yuan on the figure for the first half, the Shanghai headquarters of the PBOC said in a statement.

August new individual mortgages, which topped 7.13 billion yuan, were the highest monthly figure since 2005 in Shanghai, which pushed authorities to caution commercial banks on risks.

The third quarter's new individual home loans accounted for 91 percent of the total new individual consumer lending in the city.

Personal consuming borrowing accounted for about 70 percent of the newly issued yuan-backed lending at domestic banks.

There is a saying in the real estate market that September is the golden period for transactions, while October is the silver season.

The continuing rise in property prices in Shanghai also pushed buyers to seal deals in case of further increases.

More home buyers applied for loans before October amid speculation that the central bank is rolling out measures to cool the market. This turned out to be true.

On September 27, the central bank and the banking watchdog ruled that mortgage holders who apply for another home loan had to produce a downpayment of at least 40 percent and pay a 10 percent premium on their interest rates.

Requirements on third or fourth property purchases are even stricter.

City-wide, total new loans, including yuan and foreign currency-backed from domestic and overseas banks, topped 236.4 billion yuan, up 86.95 billion yuan from a year ago.

The third quarter new lending is already 50.6 billion yuan more than the figure for the whole year of 2006.

Overseas banks are quickening yuan lending, 63.2 percent of which was issued to manufacturing, property, leasing and commercial industries in the third quarter.

The fast yuan lending expansion has also triggered authorities' concerns over liquidity.

The yuan lending-to-deposits ratio at overseas banks topped 152.8 percent, up 23.4 percentage points from the beginning of this year.

In some banks, the figure has surpassed 500 percent.