China to cut existing mortgage rates by end-Oct, cities ease home-buying curbs

BEIJING (Reuters) -China’s central bank said on Sunday 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 (LPR), 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 this year 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 announced on Sunday 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 downpayment ratio for first homebuyers to no less than 15%.

Reuters reported on Friday that Shanghai and Shenzhen were planning to lift key remaining restrictions to attract potential buyers.

The announcements on Sunday come after China unveiled on Tuesday its biggest stimulus since the COVID pandemic to pull the economy out of its deflationary funk.

‘URGENT ADJUSTMENTS’ TO BOOST SALES

Property-related figures released earlier this month showed new home prices fell at the fastest pace in more than nine years in August and property sales slumped 18.0% in the first eight months of the year.

The mortgage rate reduction set out by the central bank aims to ease homeowners’ 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,” the PBOC added.

China’s biggest four state-owned banks, including Industrial and Commercial Bank of China Ltd and China Construction Bank (OTC:) Corp, 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 homebuyers, leaving existing homeowners 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 ($5.39 billion) at the end of June, down 2.1% year-on-year, according to official data.

© Reuters. FILE PHOTO: A drone view of an under-construction residential development by Country Garden in Shanghai, China February 29, 2024. REUTERS/Xihao Jiang/File Photo

The PBOC also announced on Sunday 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.

($1 = 7.0110 renminbi)

Read More

Spread the love
Nicholas ‘Nick’ Statman entered the property industry in 2001 and set up a property buying company that quickly established itself as one of the biggest in the sector. During this time the Company successfully transacted on thousands of residential properties across the UK. Nicholas Statman was an early pioneer of the ‘quick sale’ niche market which has since grown considerably with a multitude of companies now operating in the sector. Nicholas Statman has strategically built a sizeable residential and commercial property portfolio with a view to holding for optimum capital growth and a long term passive income. Nicholas Statman has been involved in almost every aspect of the property sector over a 20 year period – this includes buying and selling, development, letting and management and is now involved in the fast growing online/ hybrid Estate Agent industry.

Latest articles

Africa: Late Diagnosis Is Turning Cancer Into Death Sentence...

allAfrica] African women die of breast cancer within five years in four out of five cases, compared to early diagnosis in developed countries...

Uganda: Uganda Signs U.S.$3 Billion Deal for SGR With...

Nile Post] Uganda has signed a landmark $3bn (approximately shs10.8 trillion ) contract with Turkish construction firm Yapi Merkezi to build a 272km section of railway, boosting regional trade and economic integration...

Africa: Nearly Two Million Severely Malnourished Children at Risk...

Unicef] UNICEF launches urgent appeal for US$165 million to reach children as some countries run critically low on therapeutic food for treatment...

Similar articles

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Subscribe to our newsletter

Spread the love