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China’s Central bank announced on Sunday that it will instruct banks to reduce mortgage rates for existing home loans before the end of October. This move is part of a series of measures aimed at supporting the country’s struggling property market amid a slowing economy.

Commercial banks will be required to gradually lower Interest rates on existing mortgages to be at least 30 basis points below the Loan Prime Rate (LPR), which is the Central bank‘s benchmark rate for mortgages. It is estimated that existing mortgage rates will be cut by an average of about 50 basis points.

Various policies, such as reductions in down-payment ratios and mortgage rates, have been implemented throughout China this year to bolster the property market. Despite these efforts, the market has continued to face challenges, impacting overall economic growth.

In addition to the Central bank‘s announcement, Guangzhou city has lifted all restrictions on home purchases, while Shanghai and Shenzhen have indicated plans to ease restrictions on housing purchases by non-local buyers and lower the minimum down payment ratio for first-time homebuyers to no less than 15%.

These measures come after China recently unveiled its largest stimulus package since the COVID pandemic to revive the economy.

The Central bank aims to ease homeowners’ mortgage burdens with the rate reduction, in a bid to stimulate the property market and domestic consumption demand. China’s biggest state-owned banks have expressed willingness to comply with the policy and adjust existing mortgage Interest rates accordingly.

Most local governments have already eliminated floors on mortgage rates, with the exception of major cities like Beijing and Shanghai. Previous mortgage rate reductions primarily benefited new homebuyers, resulting in existing homeowners facing higher-rate loans. This has led to households rushing to pay off their mortgages early, impacting spending and consumption.

The PBOC also extended supportive measures for developers’ real estate development loans and trust loans until the end of 2026 to better meet developers’ financing needs.

(Data source: Reuters)

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