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Feb. 15, 2011, 10:17 p.m. EST

China banks end first-home loan discount: report

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By China Bureau

SHANGHAI (MarketWatch) -- Many banks in the Chinese cities of Shanghai, Beijing and Shenzhen have stopped offering discounts on mortgage loans for first-time home buyers, the National Business Daily reported Tuesday, citing unnamed bank staff.

Industrial & Commercial Bank of China Ltd. (1398.HK), China Construction Bank Corp. (0939.HK), and Shanghai Pudong Development Bank Co. (600000.SH) have stopped offering such discounts, the report said.

Chinese banks have some flexibility when it comes to setting the rates they charge based on their assessment of credit risk, and some have been offering first-time home buyers discounted mortgage rates of 0.85-0.95 times benchmark lending rates, the report said.

Some lenders have stopped issuing loans to first-time home buyers altogether after the recent interest-rate hike and as lending curbs have limited the amount of loans banks can extend, the report said, without citing any sources.

China's central bank raised its benchmark interest rates for the third time in four months on Feb. 8, and economists expect further rate hikes later in the year as the government seeks to rein in inflationary pressure.

Late last month, China's State Council announced new property tightening measures such as higher down payments for second home purchases and limits on home purchases in certain cities to rein in stubbornly high property prices.

Newspaper website: http://www.nbd.com.cn

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