Chinese financial regulators announced on Sunday that they would lower the lower limit on interest rates on home loans by the corresponding term of the lending prime rate (LPR) for first-time buyers to support housing demand and healthy development of the real estate sector.
The floor on the mortgage rate for first-time home buyers is reduced to 20 basis points below the corresponding LPR terms, and the minimum mortgage rate for second-home buyers remains unchanged, according to a statement issued jointly by the People’s Bank of China (PBOC) and the China Banking and Insurance Regulatory Commission.
China’s one-year LPR was 3.70% and the five-year LPR, typically used as a benchmark for mortgages, stood at 4.60%, according to the PBOC monthly fixing in April.
The central bank reiterated in the statement that “housing is for living in, not speculation.”
The cut is aimed at encouraging demand, echoing “promoting the stable and healthy development of the real estate market” mentioned at the meeting of the Political Bureau of the Communist Party of China Central Committee held on April 29, Yang said. Chang, Zhongtai’s chief analyst. Securities, Securities Times reported Sunday.
Yang also stressed that the reduction only affects first-time home buyers, saying it is designed to avoid encouraging speculation.
The statement said the two financial regulators will guide banks in deciding the mortgage rate floor based on a “city-specific” principle.
Yang said the principle will help make more precise rate adjustments in an effort to prevent house prices from rising rapidly.
Loans to Chinese households fell in April, with mortgages contracting by 60.5 billion yuan ($8.91 billion) in the month. The country’s top 100 property developers saw sales plunge 16.2% in April from March.
The central bank’s mortgage policy fully reflects the government’s determination to reverse the recent decadent trend in real estate transactions, said Yan Yuejin, research director of the E-House Research Institute, noting that the reduction will help developers’ sales. and will further reduce the cost of the house. buyers, in addition to some other policies that have been issued, according to Securities Times.
Banks in more than 100 cities have cut mortgage rates by 20 to 60 basis points or started easing property purchase restrictions since March, PBOC officials said in April.