(Yicai) Oct. 26 -- Commercial banks in China have begun to switch eligible buyers’ existing mortgages on second homes into loans for first-time buyers that offer preferential interest rates after the country launched a series of measures to cut borrowing costs.

A property buyer in Beijing received a text message from her bank yesterday that her mortgage as a second-time home buyer had been changed into that of a first-time loan, she told Yicai. This has reduced the interest rate by 50 basis points to 4.85 percent, based on this month's loan prime rate plus 55 bps. 

The new policy allows households with no local property to buy one and apply for a mortgage like first-time buyers, regardless of their previous credit records. Since the end of August, China's first-tier cities -- Beijing, Shanghai, Guangzhou, and Shenzhen -- have applied the measure. 

On Aug. 31, People’s Bank of China said lenders would lower interest rates on existing mortgages from Sept. 25. The central bank also allowed buyers who have credit records but do not own a local property to switch their second-home loan into a first-home loan so as to take advantage of the preferential policy. 

Banks automatically adjusted rates on eligible first-home mortgages on Sept. 25, without borrowers needing to apply, Yicai learned, though borrowers eligible under the new policy must apply to convert their second-home mortgage into a first-home loan.

With an average reduction of 0.73 percentage point, China has cut the interest paid on nearly 50 million existing housing loans by about CNY22 trillion (USD3 trillion), according to a report released by PBOC Governor Pan Gongsheng. The new policy will cut interest payments by CNY160 billion (USD22 billion) a year, an average of CNY3,200 (USD437) per household. 

Editors: Dou Shicong, Martin Kadiev