China’s southern metropolis Guangzhou has started implementing a new policy on home down payment requirement, with those who already own a home in the city but has paid off previous home mortgage loans recognized as first-time home buyers to enjoy 30% downpayment requirement, according to several local real estate brokerages.
The down payment requirement for those who haven’t paid off previous mortgage loans will be lowered to 40%, down 30 percentage points from the highest level.
However, the city kept the downpayment ratio floor for first-home buyers unchanged at 30%, missing market expectations.
In addition, the city lowered the interest rate floor of mortgage loans for first-time home buyers by 10 basis points to below the benchmark policy rate, the 5-year loan prime rate, to 4.1%, making it the first tier-one city in mainland China to do so. Before the adjustment, the floor of mortgage rates for first-home buyers was in line with the 5-year LPR.
Those who already own a home in Guangzhou but have paid off previous mortgage loans will be treated as first-time home buyers and enjoy the mortgage rate of 4.1% while those who haven’t paid off previous mortgage loans will enjoy mortgage rate 30 basis points above the 5-year LPR.
Considering that banks have some power in pricing their home mortgage rates, their mortgage rates for home buyers could be slightly different, according to a banking industry insider.
The Guangzhou’s move came after the People’s Bank of China (PBOC) and the National Administration of Financial Regulation (NAFR) on August 31 said in a notice about optimizing housing mortgage policy that the minimum down payment requirement ratio for first-time home buyers should not be lower than 20% and that for second-home buyers should not below 30%.
The notice also said that the floor of home mortgage rates for first-time home buyers should not be lower than 20 basis points below the benchmark 5-year LPR and that for second-home buyers should not be lower than 20 basis points above the policy rate.
Compared to the policy released by the central government, Guangzhou’s new policy measures reserve some room for further policy relaxations, industry insiders say.
They believe that Guangzhou’s moves will be followed by Shenzhen, Shanghai and Beijing, where home prices in these cities are the highest across mainland China.
