Three foreign banks in Shanghai yesterday clarified their rules on multiple mortgages after Chinese authorities moved to clamp down on property speculation by making it more expensive to get a second mortgage.

Citibank, Bank of East Asia and Standard Chartered said each mortgage holder would be treated as an individual, paving the way for husbands and wives to take separate mortgages on two properties without incurring penalties.

Since September 27, the People's Bank of China and the China Banking Regulatory Commission require mortgage holders who apply for a second home loan to produce a down payment of at least 40 percent and pay a 10 percent premium on interest rates. The requirement on third or fourth mortgages will be stricter.

However, the regulators failed to spell out the definition of a mortgage holder, and whether it includes family members who did not sign the loan document. The rules also didn't clarify whether they applied to someone who had previously paid off a first mortgage.

Some Chinese banks, including China Construction Bank, said they define the mortgage on an entire family. Others, such as Bank of Communications and China Everbright Bank, said they only consider the mortgage holder's credit history.

At Citibank and BEA, applicants who have already repaid their mortgages and plan to take out another won't be hit with the higher rates. Citibank requires a 45 percent down payment and a 15 percent premium on interest rates.

HSBC said it is implementing the state rules, without providing further details.

The four overseas banks are the first to offer yuan services to Chinese residents. Overseas banks' market share of individual mortgages is limited when compared with their Chinese rivals.

Shanghai Banking Association is considering issuing nonbinding guidelines on multiple mortgages as most city banks are waiting to implement the new guidelines.

(Shanghai Daily October 23, 2007)