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On the evening of August 23, market news said that the Shanghai Banking Association issued a notice on further strengthening the self-discipline of Shanghai's banking industry's personal housing loan business, halting the "rebate" for housing loans and requiring rectification of existing business within 7 days.

A reporter from the Daily Economic News confirmed the authenticity of the notice with staff from a bank branch in Shanghai and relevant departments, and a bank has confirmed to the reporter that it has received the notice.

The notice stated that from August 16, all member units are strictly prohibited from paying commissions to housing cooperatives, etc., and existing businesses must be rectified within one week (7 natural days) after the issuance of this notice.

Zhao Yaping (pseudonym), a Shanghai intermediary, revealed to the reporter of "Daily Economic News" that in the past six months or so, the highest "rebate" had reached 1% (commercial loan amount), and the most recent ratio is 4‰, half of which requires an invoice and is transferred from the bank account to the intermediary company account, which requires the intermediary company and the bank to sign an agreement; the other half is paid directly in cash by the bank's credit officer.

Is the essence of “rebate” actually commission?

Zhang Bo, director of the 58 Anjuke Research Institute, once analyzed and pointed out that "rebates" can essentially be regarded as a commission, that is, banks pay fees to relevant intermediary institutions that provide mortgage services in order to compete for market share in the mortgage business.

By paying rebate commissions, banks' operating costs will indeed increase, but it can effectively increase the total amount of mortgage loans, especially for high-quality assets such as mortgage loans, banks are more willing to lend. For banks with greater lending pressure, this method has obvious short-term benefits.

The reporter learned from multiple sources that the Jiangsu Banking Association also stopped the mortgage "rebate" this month, requiring all banks and financial institutions to standardize cooperation agreements with intermediary institutions by the end of July 2024. A third-party agency source told the reporter that previously, the rebate ratio of Jiangsu banks' mortgage loans to institutions was between 6‰ and 10‰.

The manager of the loan department of a commercial bank's Shenzhen branch previously revealed in an interview with a reporter from the "Daily Economic News" that the rebate for mortgage loans is phased, with the highest being 6‰ (of the loan amount). The worse the market is, the higher the rebate is, and when the market is good, there is no rebate.

The "rebate" phenomenon does not only exist in new home loan business. According to a previous report by the "Daily Economic News", Shanghai home buyer Chen Qing (pseudonym) applied for a second-hand home mortgage business in June this year, and the commercial loan rebate was converted into a 5-gram gold bar.

Not only that, some credit managers who are under great pressure from performance appraisals even pay out of their own pockets to give "rebates" to customers and spend money to do business.

Why does “rebate” on mortgage loans appear?

Zhang Bo explained that the phenomenon of "rebates" on mortgage loans essentially requires two conditions. First, the real estate market continues to be at a relatively low point, and the volume of first-hand and second-hand transactions continues to decrease, resulting in a continuous reduction in the scale of mortgage loans; second, loan interest rates continue to decline, and the net interest margin of the banking industry continues to decline, accompanied by increased lending pressure.

But the harm caused by this unconventional method is obvious.

"On the one hand, some banks irrationally increase the rebate ratio to a high level in order to attract customers, which may lead to potential risks in the market. At the same time, the high rebate ratio will directly squeeze the bank's profit margin, resulting in a continuous reduction in net interest margin, which is not conducive to the long-term operation of the bank."

"On the other hand, it is possible that some intermediaries may take some unfair measures, such as assisting clients in providing false materials, which increases the bank's mortgage risk. The bank may also neglect to control the quality of the loan, leading to an increase in the non-performing loan rate, thereby increasing financial risks," Zhang Bo explained.

Currently, the real estate sales market is in deep adjustment. All cities are generally facing the problems of high new home inventory and shrinking second-hand home transactions. The scale of personal housing mortgage loans has been shrinking as a result.

The latest data released by the National Bureau of Statistics show that from January to July, among the funds available to real estate developers, personal mortgage loans amounted to 874.8 billion yuan, a decrease of 37.3%.

In the face of a significant shrinkage in the mortgage pie, banks have pressed the "rebate" end button, which means entering a new stage of competition.

Yan Yuejin, deputy director of Shanghai E-House Real Estate Research Institute, believes that the key for banks to expand their loan business is to optimize services. This method of paying commissions is unsustainable. The "rebate" of mortgage loans is essentially the involution of the mortgage business. It is very necessary to control it. Otherwise, if this model is allowed to develop, it will not only increase the cost of banks' loan business, but also disrupt the order of the real estate market and create potential risks for home buyers.

Daily Economic News