An apartment building in Shanghai, China - Photo: AFP/TTXVN
The move is seen as part of a comprehensive policy to support China's struggling property market amid sluggish economic growth.
Commercial banks will cut existing mortgage interest rates in batches and cannot be lower than 0.3 percentage points below the loan prime rate (LPR), the benchmark interest rate for mortgage loans, according to a statement from the People's Bank of China (PBoC, the central bank).
Banks' mortgage rates are expected to be cut by an average of about 0.5 percentage points.
Across China, a series of policies including lowering down payment ratios and mortgage interest rates have been issued this year to support the still-crisis property market.
However, these stimulus measures have struggled to boost home sales or increase liquidity in the market, which has been kept away by buyers and continues to be a major drag on China's overall economic growth.
On the same day, Guangzhou city (China) announced the complete lifting of home purchase restrictions, while Shanghai and Shenzhen said they would relax restrictions on buyers without local household registration and lower the minimum down payment ratio for first-time home buyers to no less than 15%.
The cities of Shanghai and Shenzhen are planning to lift remaining policy restrictions to attract potential homebuyers. The announcements come after the Chinese government unveiled its biggest stimulus package since the COVID-19 pandemic last week to boost economic growth.
Data on China's property market released earlier this month showed new home prices in the country fell at their fastest pace in more than nine years in August 2024, and property sales fell 18% in the eight months to the beginning of this year.
The PBoC's move to cut mortgage interest rates is aimed at easing the debt burden on homebuyers, thereby boosting the weak real estate market and domestic consumer demand.
“With the market-oriented reforms of interest rates and the major changes in the supply and demand relationship in the real estate market, the current mortgage interest rate pricing mechanism has exposed some shortcomings. With strong public feedback, this mechanism needs to be urgently adjusted and optimized,” the PBoC said.
China's four largest state-owned banks, including Industrial and Commercial Bank of China and China Construction Bank, said they will actively respond to the policy and promote orderly adjustment of existing mortgage interest rates.
Most local governments, except for some major cities such as Beijing and Shanghai, have removed the floor on mortgage interest rates.
Previous mortgage rate cuts have mainly benefited new homebuyers, while homeowners have been saddled with higher interest rates, leading many households to rush to pay off their loans early, reducing their ability to spend and consume.
The PBoC also announced that it will extend support measures for real estate development loans and trust loans of real estate developers until the end of 2026, to better meet their financing needs.
Source: https://tuoitre.vn/ha-lai-suat-the-chap-cu-hich-moi-cho-thi-truong-bat-dong-san-trung-quoc-20240930143407022.htm
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