China Everbright Bank (CEB) has officially lowered its individual loan rates recently, with the biggest drop reaching 35 basic points, the Beijing Business Today reported Wednesday, citing an unknown source within the CEB Beijing branch.

According to the newspaper, all five categories of individual housing loan rates have been reduced and the specific adjustment varies from 5 bps to 35 bps based on different loan tenures.

Recent reports also pointed out that the four major state-owned banks' Shenzhen branches were loosening their lending policy on second homes, indicating that domestic commercial banks are considering easing controls over individual housing loans policy.

Although till now CEB is the only bank that actually reduced its individual loan rates, a lot of other banks have created all kinds of lending products to disguise the actual loan rate cut in order to attract potential buyers.

All of these measures conducted by the banks are "directly connected to the central bank's policy on loan rates for second homes," said Guo Tianyong, a research director from the Central University of Finance and Economics. He argued that this policy affects people's appetites to acquire a second piece of property.

If the property market has difficulties selling houses, the developers are incapable of repaying their loans to the banks, leading to a sharp drop in banking revenue inside the lending business. With the second home lending interest rates tightly controlled by the People's Bank of China, the commercial banks have to attract more sales in the first home loan business.

"Currently, banks can offer a discount of 15 percent at most to a first-home buyer," Guo said, adding that most banks currently can afford an even bigger discount.

For more details, please read the full story in Chinese

(http://www.bbtnews.com.cn/news/channel/political50083.shtml).

(China.org.cn by Yan Pei, June 25, 2008)