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Housing fund ups mortgage rates

(Reuters)
Updated: 2006-04-30 07:29

SHANGHAI, April 29 - China's public housing fund has raised its mortgage rates for individual house buyers by 18 basis points effective from May 8, the official Xinhua news agency said on Saturday.

The annual interest rate for loans with a maturity of five years or less will rise to 4.14 percent from 3.96 percent, Xinhua said, citing an announcement by the Ministry of Construction, supervisor of the public housing fund.

Mortgage loans with a maturity of more than five years will now carry an annual interest rate of 4.59 percent, up from 4.41 percent, it said.

Earlier this week, China's central bank raised the benchmark lending rate for one-year loans by 0.27 basis points to 5.85 percent from 5.58 percent. The rate for deposits remained unchanged.

The central bank said the higher benchmark rate would have a small but limited impact on housing mortgages.

The lending rate hike by the central bank was aimed at preventing the economy from overheating, after a rapid expansion of loans and fixed-asset investment in the first quarter.

One sector of particular concern to central planners is the speculative real estate markets in major cities.

The public housing fund, established when China reformed its housing system in the 1990s, was designed to help medium- and low-income earners buy houses.

Employees are required to contribute 5 to 12 percent of their salaries to the fund, matched by employers. The fund's mortgage loans carry lower rates than commercial mortgages.