China to cut existing mortgage rates by end-October, cities ease home-buying curbs
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The moves are part of sweeping policies to support the country’s beleaguered property market as the economy slows.
PHOTO: AFP
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BEIJING - China’s central bank said on Sept 29 it would tell banks to lower mortgage rates for existing home loans before Oct 31, as part of sweeping policies to support the country’s beleaguered property market as the economy slows.
Commercial banks should, in batches, reduce interest rates on existing mortgages to no less than 30 basis points (bps) below the loan prime rate, the central bank’s benchmark rate for mortgages, according to a statement released by the People’s Bank of China (PBOC).
It is expected to cut existing mortgage rates by about 50 bps on average.
Across China, a slew of policies including reductions in down payment ratios and mortgage rates have been introduced in 2024 to support China’s crisis-hit property market.
But the stimulus measures have struggled to boost sales or increase liquidity in a market shunned by buyers that has remained a big drag on broader economic growth.
Adding to such efforts, Guangzhou city on Sept 29 announced the lifting of all restrictions on home purchases, while Shanghai and Shenzhen said they would ease restrictions on housing purchases by non-local buyers and lower the minimum down payment ratio for first home buyers to no less than 15 per cent.
Reuters reported on Sept 27 that Shanghai and Shenzhen were planning to lift key remaining restrictions to attract potential buyers.
The announcements on Sept 29 come after China on Sept 24 unveiled its biggest stimulus
Property-related figures released earlier in September showed new home prices fell at the fastest pace in more than nine years in August, and property sales slumped 18 per cent in the first eight months of the year.
The mortgage rate reduction set out by the central bank aims to ease home owners’ mortgage burden, seeking to boost the property market and weak domestic consumption demand.
“As market-oriented reforms on interest rates continue to deepen, and the supply and demand relationship in the real estate market undergoes major changes, the current mortgage rate pricing mechanism has exposed some shortcomings,” the PBOC said in its statement.
“With the public showing strong responses (to the situation), the mechanism needs urgent adjustments and optimisation,” it added.
China’s four biggest state-owned banks, including Industrial and Commercial Bank of China and China Construction Bank, said they would actively respond to the policy and were promoting the orderly adjustment of existing mortgage interest rates.
Most local governments, except for some megacities including Beijing and Shanghai, have already scrapped floors on mortgage rates.
Previous mortgage rate reductions primarily benefited new home buyers, leaving existing home owners with higher-rate loans. This has resulted in a rush by households to pay off existing mortgages early, further constraining households’ spending and consumption.
The outstanding value of individual mortgages stood at 37.79 billion yuan (S$6.9 billion) at the end of June, down 2.1 per cent year on year, according to official data.
The PBOC also announced on Sept 29 that it would extend supportive measures of developers’ real estate development loans and trust loans to the end of 2026, to better fulfil developers’ financing demand. REUTERS
