China’s central bank and financial regulator on Thursday issued notices to ease some borrowing rules to aid homebuyers, including lowering the existing mortgage rate for first-home buyers and the down payment ratio in some cities, in the latest efforts to revive a crisis-hit property market.
Starting from Sept. 25, first-time home buyers with mortgages can apply to their banks for a lower interest rate on their existing loans, said the two organizations.
The borrower and the bank can negotiate one of two ways to lower existing mortgage rates – lowering the interest rates in existing loan contracts, and borrowing new loans with lower rates, swapping with existing mortgages.
The ratio of the down payment will also be reduced in some cities. The ratio for first-home purchases should be no lower than 20%, and no lower than 30% for second-home purchases. Currently, most major cities have about a 30% down payment ratio for first homes, and 40% or more for second.
“The supply and demand relationship in China’s real estate market has changed significantly in recent years, and both borrowers and banks have demands for orderly adjustment and optimization of assets and liabilities,” said the two organizations in one of the notices.
Beijing has ramped up efforts to shore up the troubled property market, which accounts for roughly a quarter of the economy. Several cities this week eased mortgage curbs on top of a string of other support measures.
Two of China’s mid-sized banks, Industrial Bank Co Ltd and China Bohai Bank Co Ltd, announced Thursday night that they will start cutting interest rates on a range of deposits from Friday by 10-25 basis points.
Major state banks would also lower interest rates on some fixed-term deposits, sources told Reuters on Tuesday, an action that helps ease banks’ pressure from narrower profit margins and provides room for existing mortgage rate cuts.