Commercial banks should give the right to opt out from buying housing loan insurance back to their customers, says a signed article in China Youth Daily. An excerpt follows:

The Bank of Communications (BOCOM) announced recently it will allow its borrowers to decide whether they want to purchase housing loan insurance. In fact, before that, the Industrial and Commercial Bank of China, Bank of China and China Construction Bank had already drew up similar policies to reduce the rate of compulsory housing loan insurance, yet only to a group of customers with good credit. Now, BOCOM has taken the lead to give the right to all of its customers.

However, BOCOM's decision to return this right to borrowers is only a compromise to survive the competition with other Chinese commercial banks.

As the government has issued a series of measures to tighten its control over the country's real estate market, future house price become more unpredictable. Many people planning to purchase homes are taking a wait-and-see attitude, and as a result, the amount of mortgage loan transactions of each commercial bank shrinks. To retain and win more customers, commercial banks have to work out some favourable policies for them. BOCOM's decision is a reasonable move.

It is true that those insured get a guarantee from the insurance company; it is also true that they paid a considerable amount of premiums for that. In that sense, people should not give up their option against the insurance, simply for the banks' sake.

(China Daily July 26, 2006)