Two of China's biggest cities eased mortgage curbs and the country's top banks flagged mounting risks from the deepening property sector turmoil on Wednesday, as Beijing ramps up efforts to shore up the sputtering economy.
Guangzhou, China's fifth biggest city, and the tech hub of Shenzhen said that mortgage curbs would be eased, allowing home buyers to enjoy preferential loans for first-home purchases regardless of their previous credit record.
The moves comes after Chinese authorities called on cities to broaden the definition of first-home mortgage as part of a string of other measures to revive the troubled property market, which accounts for roughly a quarter of the economy.
In other support measures, some Chinese state-owned banks are also expected to lower interest rates on existing mortgages, three sources familiar with the matter said on Tuesday, in the first such cut since the global financial crisis.
Beijing hopes the reduction in mortgage payments will help revive consumer demand for property. Those measures are, however, adding to concerns about the impact on Chinese banks.
China's mortgage loans totalled 38.6 trillion yuan ($5.29 trillion) at the end of June, representing 17% of banks' total loan books.
The Chinese property sector has lurched from one crisis to another since 2021, and contagion fears deepened this month after liquidity stress in leading developer Country Garden (2007.HK) became public.
The expected reduction in existing mortgage rates is one of several support measures Beijing has announced in recent weeks, as concerns mount about the health of the world's second-largest economy.
The mortgage rate cuts will add to margin pressure on banks already battling headwinds such as lower lending rates, pressure from the government to prop up the economy, as well as bad debts related to developers and local government financing vehicles.
To soften the effect, major state banks would also lower interest rates on some fixed-term deposits, and the quantum of cuts would range from 10 basis points to 25 basis points.
