The rising mortgage interest rate for first-home buyers has intensified the decline in Beijing property sales, but housing prices are not likely to fall sharply, said real estate insiders. The Bank of Beijing has raised its benchmark mortgage rate for first-time buyers from 4.9% to 5.39%. China Minsheng Bank also hiked the benchmark by 10 percentage points. Early in May, major banks, including Industrial and Commercial Bank of China (ICBC), Bank of China (BOC), China Construction Bank (CCB) and China CITIC Bank introduced a 4.9% benchmark mortgage rate and hiked the benchmark for second properties. “The increasing mortgage rate has lowered the expectations of many first-time buyers. It means the cost of buying property will keep going up,” said Guo Yi, Marketing Director of real estate consultancy Yahao. Take a CNY1 million loan for example. With the benchmark interest rate, buyers need to pay CNY5,788 per month while after the interest rate rise, the monthly payment will increase to CNY6,075. According to the Beijing Municipal Commission of Housing and Urban-Rural Development, May saw a dramatic 70% drop in second-hand property sales compared with April. Real estate agency 5i5j said its online sales of second-hand property in Beijing had slipped by 39.3%, marking a new low since 2015.

Liquidity pressure has forced some banks in Shanghai to stop offering housing loans by raising interest rates for first home buyers. Some branches of CITIC Bank have halted mortgages after the bank hiked the rate for first home buyers to 1.2 times the official lending rate of 4.9%. China Minsheng Bank also raised the rate to 1.1 times the official rate, but most banks in Shanghai kept mortgages for first home buyers unchanged.