New mortgage policy lowers economic risks: analyst

BEIJING - The loosening of China's mortgage policy on Tuesday evening will help lower economic and financial risks amid falling house sales and a property downturn, said an analyst with the country's top investment bank.

"The risks of a dramatic housing market correction and economic hard landing have been lowered," said Liu Bo, an analyst with the China International Capital Corporation (CICC), in a comment sent to media.

In a joint announcement by the central bank and the China Banking Regulatory Commission, mortgages on a second home will be treated as a first mortgage if the buyer has no other outstanding mortgages.

As a result, people who wish to buy a second home will enjoy the same 30-percent down-payment ratio required of first-time home buyers, instead of the original 60-percent to 70-percent down-payment ratio.

"The policy will support housing improvement demand and demand for housing as an investment, and will effectively alleviate concerns about a dramatic housing market correction," Liu said.

Under the new policy, qualified second-home buyers will be allowed interest rates as low as 70 percent of the 6.55-percent benchmark mortgage rate, instead of paying a 10-percent premium on top of the benchmark rate as required previously.

Liu deemed the new policy a key step in phasing out administrative measures introduced since the second half of 2010 and in "normalizing" real estate policies.

If the policy proves insufficient, more measures may be introduced, predicted Liu. "The government may introduce property-related tax breaks or household registration system reform measures to boost housing demand," he added.

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