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First-Time Buyers Can't Cope With Mortgages Without Help

Institutions need to take first-time buyers into account.

By Xu Mouquan Updated Jun.19

Governments at different levels in China should sincerely carry out the first-home mortgage rate policy to protect people's ability to buy first-homes, argues one commentator. Specially, the State should encourage commercial banks to maintain the favorable rate through different incentives, with the ultimate goal being a Freddie Mac or Fannie Mae-like financial institution in China (the US bodies that encourage first-time buyers through favorable loans).
To curb rising housing prices, Beijing and some other Chinese cities have raised the mortgage rate - especially for the first home of a family - to the benchmark interest rate, up from a previous 15 percent discount, wrote Yu Fenghui, a commentator, at Beijing Youth Daily. 
If commercial banks raise the mortgage rate for a first home by such a large margin, Yu argued, it will run counter to the purposes of the country's effort to adjust and control real estate over the years, including curbing prices and making homes affordable to all. The State should protect the demand for a first home, while cracking down on speculative investment.  
Another cause for the mortgage rate raise is that, influenced by the rising operating costs and declining revenues, commercial banks will make less profits and even loses money if they stick to the previous rate. Yu proposed that the authorities should offer banks preferential policies or tax breaks if they extend favorable loans to first-time buyers. Ultimately, a financial institution similar to the US Freddie Mac and Fannie Mae should be established.