China plans 0.5% rate cut on existing home loans

China’s central bank, the People’s Bank of China (PBC), announced on Tuesday that it will lower mortgage rates on existing home loans to a level comparable to those of newly issued housing loans.

Governor Pan Gongsheng announced a 0.5 percentage point reduction in mortgage rates for existing home loans, benefiting around 50 million households, totaling 150 million people.

The PBC estimates that the reduction in mortgage interest expenses will save households an average of 150 billion yuan ($21.27 billion) per year. This is expected to stimulate both consumption and investment.

In addition to lowering mortgage rates, the PBOC will also unify the minimum down payment ratio for both first and second homes. The nationwide minimum down payment ratio for second homes will be reduced from 25 percent to 15 percent.

To further support the housing market, the PBC established a 300-billion-yuan re-lending facility on May 17. This facility enables local state-owned enterprises to purchase commercial homes for affordable housing.

The PBC is now increasing its funding proportion in this re-lending policy from 60 percent to 100 percent, aiming to accelerate the reduction of inventory in the commercial housing market.

Attribution: Xinhua

Subediting: M. S. Salama