China’s five major state banks to lower interest rates on existing first-home mortgage loans
COMPANY NEWS POLICY & REGULATION
China’s five major state banks to lower interest rates on existing first-home mortgage loans
COMPANY NEWS POLICY & REGULATION

China’s five major state banks to lower interest rates on existing first-home mortgage loans

 

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China’s five largest state-owned banks said that they will start to lower interest rates on existing mortgages for first-home loans, part of a series of support measures announced by Beijing in recent weeks.

Industrial and Commercial Bank of China Ltd (ICBC), China Construction Bank Corp, Agricultural Bank of China, Bank of China and Bank of Communications issued separate statements announcing the planned reduction, coming into effect on September 25.

The interest rates of first-home loans will be reduced to floor levels at the time when a home was purchased, effective from September 25, the banks said.

Currently, the national floor on first-home loans stands at 20 basis points below the benchmark lending rate 5-year Loan Prime Rate(LPR) – currently 4.2%. Some big cities carry higher floor rates.

Chinese brokerage China International Capital Corp Ltd (CICC) expected the average reduction for first home buyer’s mortgage rates would be 50 basis points, which could save them about 200 billion yuan ($27.31 billion).

CICC estimated that loans to first home buyers account for about 80%-90% of total outstanding mortgages.

Last week, China’s top financial regulators, including the People’s Bank of China and the National Administration of Financial Regulation, jointly issued a notice to lower down payments for both first- and second-time home-buyers, while further cutting interest rates on existing mortgages, to better meet housing demand and promote the healthy and steady development of the real estate market.

The minimum down payment ratios for first-home purchases nationwide will be no less than 20%, down from 30% previously, and those for second-home purchases will be no less than 30%, down from 40% previously, according to the notice.

In July, a meeting held by the Political Bureau of the Communist Party of China Central Committee called for optimization of real estate policy to adapt to the new supply and demand dynamic in China’s housing market.