(Yicai Global) April 15 -- Amid weakening demand, banks in more than a hundred cities in China have cut mortgage rates since last month, ranging from 20 to 60 basis points on average, according to an official from the People’s Bank of China.

Lenders in the provinces of Shandong, Hebei and Sichuan have cut home loan rates, Zou Lan, director of the PBOC’s financial market department, said at the first-quarter financial data meeting yesterday.

In fact, in some cities in Sichuan the minimum mortgage rate for first homes has been lowered to 4.9 percent, and that for second homes has been cut to 5.4 percent.

Some provinces and cities also have relaxed the lower limit on down payments and interest rates, Zou said.

“These are differentiated adjustments made by city governments and banks according to the market situation and their own business strategies,” he noted, adding that lenders set rates based on their own business conditions, the customer’s risk level, and credit conditions.

In China, mortgage rates and down-payment ratios are set at the the national, city and bank levels. At the national level, the interest rate on the first home loan should not be lower than the loan prime rate, and that of the second home loan should not be below the LPR plus 60 basis points.

Based on the national benchmark, provincial and municipal bank branches determine the lower limits of the markup of each city. Lenders specify the interest rates bearing in mind their own operations, as well as the risks of customers and credit conditions.

The current one-year LPR is 3.7 percent and the five-year rate is 4.6 percent. Affected by Covid-19 outbreaks, the income of some residents fell last quarter, with sales of commercial housing dropping and personal housing loans declining somewhat, Zou said.

Editor: Peter Thomas