Many Chinese commercial banks, including Industrial and Commercial Bank of China (ICBC) and Agricultural Bank of China (ABC), cut their mortgage rates on existing home loans as part of the implementation of policies proposed in September by the People's Bank of China (PBC) to boost the property market. The move is also part of a package of incremental policies rolled out by the Chinese government to support the economy, covering a wide range of important sectors such as domestic demand, the property and the capital market. The Chinese government called for the intensification of the counter-cyclical adjustment of monetary policy.
Mortgage rates for first, second homes and multiple homes have been reduced to no lower than 30 basis points (BP) below the loan prime rate (LPR). The reduction in mortgage rates does not require any action from borrowers. In Beijing, Shanghai, and Shenzhen, mortgage rates can only be adjusted to the local policy rate floor; in other regions, mortgage rates will be adjusted to LPR-30BP. After the adjustment, the average reduction in mortgage rates for existing home loans will be around 0.5 percentage points. The move is expected to benefit 50 million households, or a population of 150 million, and reduce the total interest expense for households by approximately CNY150 billion per year on average, which will help boost consumption and investment, Pan Gongsheng, Governor of the People's Bank of China (PBOC), said on September 24. “The move will lower the financial burden on property owners, which will unlock consumer potential while also bolstering confidence in the real estate sector, thereby further stabilizing the housing market,” Yan Yuejin, Vice President of the Shanghai-based E-house China R&D Institute, told the Global Times.
In a bid to prop up the housing market, the central bank in late September ordered cuts in mortgage rates for existing loans, as well as lowered down payment ratios and relaxed purchase restrictions. Since the end of September, there has been a marked increase in the number of viewings, visits and signing of contracts for new properties, and the volume of transactions for second-hand properties continued to rise, resulting in positive changes in the market, Ni Hong, Minister of Housing and Urban-rural Development, told a press conference on October 17. “China's real estate market is rebounding after three years of adjustments driven by various policies, and figures for October are expected to reflect a positive and optimistic trend,” Ni noted.
According to the Research Institute of Centaline Property, the number of online signed contracts for second-hand residential houses in Beijing reached 11,699 from October 1 to 24. The expected number of online contract signings for second-hand houses in October is set to exceed 16,000 units, potentially reaching the highest value in nearly 19 months. During the same period, the actual transaction volume of second-hand houses in Beijing has already exceeded 20,000 units, with a year-on-year increase of more than 150%, the Global Times reports.
