Chinese financial authorities on Sunday allowed a further cut in mortgage loan interest rates for some home buyers, in another push to prop up its property market and revive a flagging engine of the world's second-largest economy.
For purchases of first homes, commercial banks can reduce the lower limit of interest rates on home loans by 20 basis points, based on the corresponding tenor of benchmark Loan Prime Rates (LPRs), the People's Bank of China (PBOC) and China's Banking and Insurance Regulatory Commission said in a statement.
The cut aims to support demand and promote stable and healthy development of the real estate market, the statement said. In its monthly fixing in April, the PBOC kept its one-year LPR unchanged at 3.70% and the five-year LPR, typically used as a benchmark for mortgage loans, steady at 4.60%.
Banks in many cities cut mortgage rates in the first quarter following calls from authorities to support buyer sentiment in a market rocked by a liquidity crunch and troubled developers last year, and now by nationwide COVID-19 outbreaks.
"Policies including lowering down-payments, lowering mortgage interest rates, loosening restrictions on secondhand housing sales and loosening purchase restrictions will create better conditions for active market transactions in mid-to-late May," said Yan Yuejin, research director of Shanghai-based E-house China and Development Institute.
But despite the easier mortgage loan guidance, much depends on the banks. "During lockdowns, banks tend to be more risk-averse.They have been told to keep past-due loans on their books. Under these circumstances, banks have become unwilling to create new loans, as that would mean taking on more risk by getting new loans and then waiting for them to become past due if lockdowns continue," said Iris Pang, senior Greater China economist at ING