China Raises Mortgage Interest Rates, Down Payments to prevent bubble

Discussion in 'Economics' started by ASusilovic, Sep 27, 2007.

  1. China raised interest rates on some mortgages and increased minimum down payments in an effort to cool property prices that jumped almost 10 percent last month.

    The rate on loans for second homes and on commercial real estate was pushed to at least 1.1 times ``benchmark'' rates that the People's Bank of China didn't specify in a statement late yesterday. Buyers will have to pay not less than 40 percent of a property's value as down payment, up from 30 percent.

    The measures tighten controls in a market where the government is concerned that a surge in lending is creating a bubble, which would drive up bad loans should it collapse. Investment in real-estate development jumped 29 percent in the first eight months of this year. The statement also said the maximum mortgage for commercial property is half of its value, and the term can't exceed 10 years.