A move by China's Ping An Bank to ban its regional branches from approving mortgages may signal that Beijing is set to tighten controls on the property market to calm record
prices, market sources said on Wednesday.
Rising house prices, which have pushed home affordability rates to all-time lows, have fanned speculation China will expand a three-year campaign to cool the property market by cracking down harder on investment or speculative purchases.
Ping An's decision to have its headquarters take charge of home loans is likely a signal from the mid-sized lender that it anticipates a tougher policy line from the central government and is preparing to toe it, rather than a shift in strategy to better manage risks, said an analyst at ratings agency Fitch.
"I don't think this is related to risk management or rising credit risks. I think this is more related to macroeconomic policies," added the analyst, who declined to be identified because she was not authorised to speak to media in mainland China.
For now, bankers say Beijing has not further tightened controls and mortgage lending is proceeding as before. They regard Ping An Bank's move as pre-emptive and unlikely to be followed unless forced to by Beijing as home loans are typically the safest assets in Chinese bank ledgers.
"There has been talk of possible tightening in mortgage lending, but we've received no notice from the headquarters to change current practices," said a loan officer at a branch of one of China's four biggest banks.
A second banker from another of China's major banks also said his bank had yet to change its mortgage lending practices.
Ping An Bank, majority-owned by Ping An Insurance, the world's second-largest life insurer by market value, said on Tuesday it had barred all its branches from approving home loans and that it has reduced mortgage lending in "recent years".
"Our head office has asked branches to hand over the right to examine and approve mortgage loans recently and all mortgage cases will be handled by the headquarters," Ping An said in an email reply to Reuters.
"The head office will prioritise loans for home occupiers while restricting speculative purchases of homes. With regards to traditional home loans, an area of business more subjected to policy tightening, our bank has consciously scaled back."
To support first-home buyers, Ping An said they get a 15 percent discount on benchmark interest rates for mortgages. Second-home buyers, on the other hand, are charged mortgage rates 1.1 times that of benchmark levels, Ping An said.
Ping An's move to increase control over mortgages came a week after China's cabinet restated its intentions to expand a pilot property tax programme to more cities as it urged local governments again to control prices of new homes.
Despite mounting concerns over China's record house prices, a source of discontent for ordinary Chinese and a concern for stability-obsessed Beijing, analysts and bankers have long argued mortgages are banks' best and safest assets.
High down payment rates for buyers that reduce the amount of debt involved in home purchases have helped to keep delinquency rates on mortgage loans low, analysts say.
Industrial and Commercial Bank of China, China's biggest bank by assets, for instance, reported a non-performing ratio of 0.9 percent for property loans in 2011, below an average 1.2 percent for all its loans.
China's bank regulator too recognises that home loans are the least of banks' problems when it comes to credit risks.
Mortgages have a risk weighting of 50 percent when banks calculate their capital adequacy ratios, compared to 100 percent for corporate loans. "Mortgage loans should always be the safest assets for banks," the Fitch analyst said.