What’s new: Mortgage loans accounted for more than 40% of China’s new bank lending in October as banks moved to ease up on real estate lending restrictions amid concerns about the debt crisis at China Evergrande Group.
Banks extended 826.2 billion yuan ($129.3 billion) of new loans in October, down sharply from 1.66 trillion in September, data released Wednesday by the People’s Bank of China showed.
Of the new loans, 348.1 billion yuan were mortgages, an increase of 101.3 billion yuan from September, the central bank said. Analysts attributed the increase to a correction from over-implementation of real estate lending policy since late September but said it doesn’t indicate a change in policies limiting real estate borrowings.
A branch head of a major bank said the mortgage quota assigned to his branch was increased since late September, and it began to accept new mortgage applications in October after a suspension of a few months.
The background: The central bank and the China Banking and Insurance Regulatory Commission (CBIRC) introduced a mechanism in December to cap banks’ outstanding property loans as a proportion of total loans and their ratio of outstanding mortgages to total loans.
Since then, housing sales plunged. The combined sales of China’s top 100 developers plummeted 36% year-on-year in September. China’s property and construction industries contracted in the third quarter for the first time since the start of the pandemic.
After the debt crisis at Evergrande and increasing default risks at several other developers raised concerns about the overall sector, authorities sent some easing signals.
The central bank and the CBIRC summoned 24 major banks Sept. 29 and told them to cooperate with local governments to maintain stable and healthy development of the housing market and to safeguard the rights and interests of consumers. The central bank delivered the same message at its third-quarter monetary policy meeting.
Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bobsimison@caixin.com)
Get our weekly free Must-Read newsletter.
