(Yicai Global) Feb. 21 -- Twenty-three major cities in China have cut rates on mortgages for first-time homebuyers this month after the country’s central bank and the banking and insurance regulator established a dynamic adjustment mechanism for such loans last month.

Twenty-three of the 103 major Chinese cities monitored by the Beike Research Institute have trimmed the lower limit for mortgage rates on first homes so far this month, according to a report released by the think tank. Nanning in Guangxi Zhuang Autonomous Region and Zhuhai in Guangdong province made the steepest cut of 40 basis points to 3.7 percent.

On Jan. 5, the People’s Bank of China and the China Banking and Insurance Regulatory Commission unveiled a new dynamic adjustment mechanism allowing local governments to reduce or even remove the floor on mortgage rates for first-time homebuyers if prices of newly built residential property falls from both a year and a month earlier for three consecutive months. 

As a result, the average interest rate among the 103 cities fell by 6 bps to 4.04 percent in February from January, the Beike Research Institute noted. It fell 143 bps to the lowest in four years from a year earlier. The average for second-time homebuyers was 4.91 percent, the same as last month. It fell 84 bps from a year ago, further widening the gap between mortgage rates for first- and second-time buyers, the report said.

Thanks to the decline in interest rates and other supporting policies, the real estate market is continuing to recover. In the first half of February, the daily average transaction volume of second-hand homes in 50 major cities among those monitored by Beike Research Institute surged over 70 percent from a month earlier, the report showed.

Editor: Futura Costaglione