Banks muted on mortgage measure

The People's Bank of China (PBOC) unveiled its latest policy adjustment for the housing market the day before the National Day holidays, calling on commercial banks to regard anyone who has already repaid one mortgage to be considered as a first-time buyer when they apply for an additional home loan. This means that qualified home upgraders and investors will be allowed to access favorable interest rates which had previously been granted only to those purchasing a first property.

Nearly half a month later though, not a single retail lender has responded to the PBOC's charge. Still, this hasn't stopped some developers from abandoning earlier discounts. In fact, some companies have lifted home prices in expectation of a rise in demand.

Commercial banks have sat idle on the PBOC's request because issuing home loans is already a relatively inefficient way for them to make money. Offering more loans at discounted rates will only cut more deeply into their earnings.

What's more, attempting to prop up the housing market through interest rate interventions conflicts with China's ongoing market reform campaign. Commercial banks should be left to decide for themselves whether to lower rates or not.