(Yicai) April 16 -- Mortgage costs are set to decline further in China as dozens of cities remove interest rate floors to stimulate property sales, according to industry insiders.

Rates on home loans will continue to fall, said Li Yujia, chief researcher at the Guangdong Housing Policy Research Center. Mortgage rates are at a historic low, but much higher than bank are paying on time deposits and the rates of principal-protected wealth management products, he added.

China put in place a dynamic adjustment mechanism for first-home mortgage rates in January last year, allowing local authorities to lower or remove the rate floor if the selling prices of new homes fall month on month and year on year for three months in a row. More than 30 cities have removed them so far, according to Yicai’s calculations.

Given the current policy emphasis on "loosening" and "boosting demand," there is still room for an overall downward shift in mortgage rates, said Guan Rongxue, a senior analyst at Zhuge Data Research Center.

Mortgage rates are benchmarked against China’s loan prime rate. The central bank stipulates that the minimum rate on a first-home mortgage cannot be more than 20 basis points lower than the LPR. The five-year LPR stands at 3.95 percent, so the least costly home loans could carry a 3.75 percent rate.

But the housing market was generally weak in the first quarter despite booming sales of high-end residential property in some cities.

Sales of new and pre-owned homes in 70 mid-sized and big cities rose last month from the month before, the National Bureau of Statistics said today, while sales prices fell more slowly than in February but faster than a year ago.

New-build prices in first-tier cities fell 0.1 percent last month compared with February’s 0.3 percent drop. But the year-on-year decline was 1.5 percent, worse than the 1 percent drop in February. 

From January to March, sales of second-hand homes fell as 31.7 million square meters of floor space was sold in 24 key cities, down 21 percent from a year ago, according to real estate research agency CRIC Research Center.

Editor: Emmi Laine