(Yicai) March 20 -- Shijiazhuang, the capital of China’s northern Hubei province, will raise the minimum interest rate on mortgages offered to first-time home buyers after house prices rose for three straight months.

Shijiazhuang will set a mortgage rate floor of 20 basis points below the loan prime rate from April 1, according to a government document obtained by Yicai yesterday, whose authenticity was verified by the People's Bank of China.

The central government allows an ‘LPR -20 bips' minimum mortgage rate, but each city can determine its rate floor based on real estate prices in the local market.

Shijiazhuang has had an ‘LPR -50 bips' rate floor since October 2022, which is relatively low among major cities, due to its sluggish property market. But several upmarket real estate projects priced relatively high have gone up for sale in the city, leading to an increase in the average transaction price of new homes over the past three months.

The move will raise the minimum mortgage rate for first-time buyers in Shijiazhuang by 30 bips to 3.75 percent from next month, Chen Wenjing, market research director at the China Index Academy, told Yicai.

The PBOC lowered the long-term LPR for the first time in nearly six months on Feb. 20, cutting the five-year rate by a more-than-expected 25 basis points to 3.95 percent, the most since the reference rate was introduced in 2019. The one-year LPR was left at 3.45 percent.

According to data for 70 cities released by the National Bureau of Statistics every month, the average cost of a new home in Shijiazhuang has jumped month on month and year on year over the past three months, Chen pointed out. Other cities can also adjust rates based on the latest figures, he added.

Behind the increase in the average new home price in Shijiazhuang is the popularity of the high-end housing projects recently brought to market, according to a report by China Residence Information Circle. Though potential buyers are still taking a ‘wait-and-see’ stance on standard residential projects, it added.

By number, large high-end housing projects accounted for 46 percent of all property transactions in Shijiazhuang in January, according to figures from the China Index Academy.

Editors: Tang Shihua, Martin Kadiev