China to cut mortgage rates to support economy

The People's Bank of China (PBOC) announced today (Sept. 24) that it will guide commercial banks to lower interest rates on outstanding mortgages, bringing them closer to the rates of newly issued loans.

Pan Gongsheng, governor of the People's Bank of China stated that the average reduction in mortgage rates is expected to be around 0.5%. This adjustment is projected to benefit 50 million households, and approximately 150 million people, reducing annual interest payments by around RMB 150 billion.

Pan emphasized that banks will need some time to make necessary technical preparations for the rate adjustments. He also noted that the PBOC will work to improve the mortgage lending mechanism of commercial banks, allowing banks and customers to dynamically adjust rates through mutual negotiation based on market principles.

Regarding the unification of down payment requirements across the country, Pan confirmed that the minimum down payment ratio for both first and second homes will be set at 15%. However, local governments will be allowed to implement differentiated down payment policies based on local conditions. Commercial banks will set specific down payment requirements in accordance with the risk profiles and preferences of their customers.

Additionally, Pan mentioned that the PBOC will support the acquisition of real estate developers' existing land reserves. This would involve allowing policy banks and commercial banks to provide loans to qualified enterprises for the market-based purchase of developers' land. This measure aims to revitalize the stock of land and ease the financial pressures on real estate developers. Where necessary, the PBOC may offer further policy support.

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