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China's central bank has reiterated that it will continue current mortgage policies. They're to ensure the healthy and stable development of the real estate market.
The People's Bank of China said it will strictly control loans to industries with high energy consumption and high pollution. It will also continue to carry out the differentiated mortgage policy, which requires 50 percent down payment and 1.1 times the normal mortgage rates for second and more home-buyers.
Lian Ping, Chief Economist of Bank of Communications said "Since the new mortgage policies came out in April, we have seen changes in the market. The transaction volume dropped dramatically, and housing prices rose slower than before. It's expected that investment in real estate market will dampen in the third quarter."
Figure shows that the increasing rate of the loans to real estate sector slowed down in the first half of this year.
The new loans for property development fell more than 60 percent in the second quarter compared with the first quarter.
A pressure test conducted by the banks' top regulator shows that if housing prices drop 30 percent and interest rates go up 108 basis point, lenders' bad debt ratio will rise 2.2 percentage points.
Lian Ping said "Commercial banks are paying much attention to risks in the real estate sector. We are conducting pressure tests and strengthening regulation on real estate loans. I believe the risks for commercial banks are controllable."
The central bank has also said it will continue a moderately easy monetary policy this year, while making policies more pertinent and flexible. Under the authorities' plan, China will see around 3 trillion yuan of new loans in the second half of this year.