China to Allow Cities to Cut First Home Loan Rates If New Build Prices Fall for Three Months in a Row
Du Chuan
DATE:  Jan 06 2023
/ SOURCE:  Yicai
China to Allow Cities to Cut First Home Loan Rates If New Build Prices Fall for Three Months in a Row China to Allow Cities to Cut First Home Loan Rates If New Build Prices Fall for Three Months in a Row

(Yicai Global) Jan. 6 -- China will allow cities to lower and even do away with the floor on mortgage rates for first-time home buyers if prices of newly built residential properties fall for three consecutive months in a move aimed at further supporting the real estate market.

If sales prices fall from both a year earlier and the previous three-month period, local governments can maintain, reduce or remove minimum interest rates on first-time home loans, according to a new dynamic adjustment mechanism unveiled yesterday by the People’s Bank of China and the China Banking and Insurance Regulatory Commission.

Thirty-nine of China’s 70 major cities meet the conditions, including Tianjin and the provincial capitals Shijiazhuang, Taiyuan, Zhengzhou, and Wuhan, as prices fell in the three months ended November, according to the National Bureau of Statistics’ latest data.

As the property market and housing demand are sluggish, most banks will offer the lowest mortgage rate allowed by the policy, Dong Ximiao, chief researcher at Merchants Union Consumer Finance, told Yicai Global. First-time buyer rates will likely stay between 3.5 percent and 4.1 percent, Dong added.

Yesterday’s announcement extends a temporary mechanism the PBOC introduced in September to allow cities to ease mortgage rates in this way to the end of last year.

Under the new mechanism, cities where new build prices rise for three straight months after cutting mortgage rates must return to the national rate floor on first-home loans from the following quarter.

The central bank lowered the national minimum interest rate on these loans last May, setting it at 20 basis points under the loan prime rates, the country’s benchmark lending interest rates. Based on the current five-year LPR of 4.3 percent, the rate floor on first-time home loans is 4.1 percent.

Editors: Dou Shicong, Futura Costaglione

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Keywords:   Mortgage Rate,House Price,PBOC