The central bank yesterday asked major local lenders to improve risk control of mortgage operations, saying that, if necessary, it could introduce credit controls to maintain the stability of the financial system.
The central bank said in a statement that the recommendation was a measured attempt to express its concern over a feverish emerging property market without affecting the nation’s economic recovery.
“The bank invited major mortgage operators for talks on the local property market and called for strict credit screening to avoid loose lending,” the statement said.
Banks should carefully review mortgage applications to prevent property speculation under the pretense of real demand, the central bank said, following media reports that investment demand drove property transactions after interest rate cuts in March.
Lenders must warn borrowers of financial risks if they ask for grace periods or an extended mortgage, the central bank said.
Almost all local banks allow borrowers grace periods of two to five years on repaying principals, it said.
Some agree to mortgages of 20, 30 or 40 years, the statement said.
Banks should keep track of the construction progress and capital flows after approving loans to builders, it said, adding that caution is warranted given the high number of unsold houses on the market.
The central bank said that it would monitor real-estate lending, as it plays a key role in the nation’s financial health.
It would introduce selective credit controls, if necessary, to ensure the system’s stability, the central bank said.
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