(Yicai) June 5 -- The average interest rate on mortgages in major Chinese cities fell to the lowest in five years last month after the central bank relaxed its housing market policies, according to a new research report.

The average rate for first-time home buyers in 100 key Chinese cities was 3.45 percent in May, down 12 basis points from April, according to the report released yesterday by Ke Research Institute. The rate for second-time home buyers was 3.90 percent, down 26 bps and below 4 percent for the first time since 2019.

On May 17, the People's Bank of China abolished the floor on mortgage rates, lowered the minimum downpayment to 15 percent on first homes and 25 percent on second homes, and cut individual housing provident fund rates by 0.25 percentage point. It also allowed local authorities to set mortgage rates based on their individual market conditions.

Most cities responded swiftly, with more than 80 of the 100 lowering minimum downpayments to 15 percent and 25 percent as of the end of last month, according to the report.

The central bank’s move demonstrated the government’s determination to bolster the real estate market, said Meng Xinzeng, an analyst at China Index Academy. The policy easing has greatly boosted confidence, and the effect will become more evident as first- and second-tier cities gradually implement new measures in response, he added. 

Mortgage rates and minimum downpayments in first-tier cities -- Beijing, Shanghai, Guangzhou, and Shenzhen -- are still higher than the average in China. The average rate on first homes in the four cities was 3.59 percent last month, down 29 bps from April, while that on second homes was 3.98 percent, down 31 bps.

Beijing’s downpayment levels, the highest in the country, remained unchanged at 30 percent on first homes and at 50 percent and 40 percent, respectively, on second homes in central districts and those districts beyond the center.

Shanghai and Shenzhen have lowered downpayments to 20 percent on first homes and 30 percent on second properties. Guangzhou has the lowest among first-tier cities at 15 percent on first homes and 25 percent on second purchases.

Property developers will be in a first-half earnings sprint this month, and market activity is expected to pick up, Meng pointed out.

Editors: Dou Shicong, Martin Kadiev