China Announces Mortgage Rate Cuts to Boost Property Market

China's central bank will lower existing mortgage rates by October 31. This move aims to bolster the struggling property market and stimulate consumption. Banks must reduce rates by at least 30 basis points below the loan prime rate (LPR), the benchmark for mortgages.

This policy follows a series of measures this year, including down payment ratio reductions, to support the crisis-hit property sector. Despite these efforts, the market remains sluggish, dragging on broader economic growth.

Guangzhou has lifted all home purchase restrictions, while Shanghai and Shenzhen have eased rules for non-local buyers and reduced the minimum down payment for first-time buyers to 15%. These changes come after China’s largest economic stimulus since the COVID-19 pandemic.

New-home prices fell at their fastest pace in over nine years in August, and property sales slumped 18% in the first eight months of the year. The rate reduction seeks to ease homeowners’ burdens and boost the property market and domestic consumption.

The PBOC acknowledges shortcomings in the current mortgage rate pricing mechanism, necessitating urgent adjustments. China’s major state-owned banks will comply with the policy, adjusting existing mortgage rates.

Most local governments, except for some megacities, have already removed mortgage rate floors. Previous rate reductions primarily benefited new homebuyers, prompting existing homeowners to pay off mortgages early, constraining household spending.

The outstanding value of individual mortgages was 37.79 billion yuan at the end of June, down 2.1% year on year. The PBOC will extend developer loan support measures until the end of 2026 to meet financing demands.