BEIJING, Sept 29 (Askume) – China’s central bank said on Sunday it will require banks to keep mortgage rates on existing home loans low until Oct. 31, aiming to boost the country’s struggling property market amid a slowing economy.
According to a statement released by the People’s Bank of China (PBOC), commercial banks must lower existing mortgage loan interest rates by at least 30 basis points (bps) based on the central bank’s loan prime rate (LPR).
This is expected to reduce existing mortgage rates by about 50 basis points on average.
A number of policies have been implemented across China this year to support the country’s struggling real estate market, including lowering down payment ratios and mortgage rates.
but with encouragementIt has struggled to boost sales or increase liquidity in a market where buyers are staying away, which remains a major drag on broader economic growth.
Guangzhou announced on Sunday that it would lift all home purchase restrictions, while Shanghai and Shenzhen said they would relax minimum down payment ratios for non-local homebuyers and first-time homebuyers.
Askume reported on Friday that Shanghai and Shenzhen were planning to lift key remaining restrictions to attract potential buyers.
Sunday’s announcement comes just as China’s on TuesdayAnnounced the biggest stimulus package after the COVID-19 pandemic to pull the economy out of deflation crisis .
“Adjust now” to increase sales.
Real estate-related data released earlier this month showed that new home prices in August fell the most in more than nine years, and real estate sales fell 18.0% in the first eight months of this year.
The central bank lowered mortgage interest rates to ease the mortgage burden on homeowners, boost the property market, and meet weak domestic consumer demand.
The central bank said in a statement that as the market-oriented reform of interest rates deepens, the supply and demand relationship in the real estate market has undergone major changes, and the current mortgage interest rate pricing mechanism has hit certain shortcomings. .
“Due to the strong public reaction (to the situation), this mechanism needs to be immediately adjusted and adapted,” the People’s Bank of China said.
China’s four major state-owned banks, including Industrial and Commercial Bank of China Co Ltd (601398.SS) and China Construction Bank Co Ltd (601939.SS) , said they would actively respond to policies and control of current mortgage rates to promote systemic change.
Except for a few big cities such as Beijing and Shanghai, most local governments have abolished the lower limit on mortgage interest rates.
Previous mortgage rate cuts have primarily benefited new homebuyers, leaving existing homeowners with higher-rate loans. This has led to a rush among households to repay existing loans quickly , further depressing household spending and consumption.
As of the end of June, the balance of personal mortgage loans stood at 37.79 billion yuan ($5.39 billion), down 2.1% year-on-year, official data showed.
The People’s Bank of China also announced on Sunday that it will extend support measures for real estate development loans and trust loans to developers until the end of 2026 to better serve the financing needs of developers.
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