In a bid to revitalize China’s struggling property market, the country’s central bank has unveiled a series of measures aimed at reducing the financial burden on homeowners and stimulating economic growth. As part of these efforts, commercial banks have been instructed to lower mortgage rates for existing home loans by at least 30 basis points below the benchmark Loan Prime Rate (LPR) before October 31. This move is expected to result in an average reduction of 50 basis points.
The announcement comes on the heels of a slew of policies introduced this year to support the crisis-hit property market, including reductions in down-payment ratios and mortgage rates. However, these stimulus measures have yet to yield the desired results, with sales remaining sluggish and liquidity tight.
In a related development, Guangzhou city has lifted all restrictions on home purchases, while Shanghai and Shenzhen have eased restrictions on housing purchases by non-local buyers and lowered the minimum down payment ratio for first-time homebuyers to 15%. These moves are aimed at attracting potential buyers and boosting sales in a market that has been a significant drag on broader economic growth.
The property market has been a major concern for China’s economy, with new home prices falling at their fastest pace in over nine years in August and property sales slumping 18% in the first eight months of the year. The central bank’s decision to reduce mortgage rates is seen as a crucial step towards easing homeowners’ mortgage burden and stimulating domestic consumption demand.
The People’s Bank of China (PBOC) has acknowledged that the current mortgage rate pricing mechanism has exposed some shortcomings, which need urgent adjustments and optimization. The country’s biggest state-owned banks have pledged to actively respond to the policy and promote the orderly adjustment of existing mortgage interest rates.
In addition to reducing mortgage rates, the PBOC has also extended supportive measures for developers’ real estate development loans and trust loans until the end of 2026, aiming to better fulfill developers’ financing demand. With these measures in place, China is hoping to revitalize its property market and pull its economy out of its deflationary funk.
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