Mortgage rates drop to shore up housing sector amid Covid woes

Mortgage interest rates in some first-tier cities – Beijing, Shanghai and Guangzhou, Guangdong province – have been slashed following the latest cut in benchmark lending rates, while industry experts have suggested that there was still room for lower mortgage interest rates in some Chinese cities.

Personal home loan interest rates in the prominent cities of Beijing, Shanghai and Guangzhou have largely applied the latest five-year lending prime rate (LPR) by commercial banks, following the adjustment by the central bank of the benchmark lending rate based on yesterday’s market, reported the China Securities Journal.

The People’s Bank of China (PBoC), the central bank, announced that the five-year LPR, on which many lenders base their mortgage rates, has been lowered by 15 basis points to 4.45%, while the LPR year-on-year remained unchanged at 3.7%.

“The cut raised market expectations for an overall domestic market recovery as soon as the Covid-19 outbreak is brought under control,” said Zhang Dawei, chief analyst at Centaline Property Agency Ltd.

One of the most important cuts

Zhang says this is the first time since the program’s launch that the central bank has lowered the LPR over five years, and it is also one of the biggest downgrades, indicating that a stable economy does not can be reached only after stabilization. of the real estate market.

“With previous measures by financial authorities, the lowest mortgage rate is as low as 4.25%, which shows the central government’s resolve to stabilize the economy and the real estate market,” wrote a report from Zhuge Real. Estate Data Research Center.

According to a joint statement made by the PBoC and the China Banking and Insurance Regulatory Commission on May 15, based on the corresponding duration of a benchmark LPR, first-time home buyers can receive 20 basis points below the lower limit of interest rates on home loans from commercial banks.

In fact, following the LPR’s latest five-year adjustment, housing loan rates for first-time home buyers at several commercial banks in Tianjin, Suzhou, and Wuxi, Jiangsu Province, fell. at 4.25%,, based in Shanghai. the media reported.

Chen Wenjing, deputy director of research at the China Index Academy, says he thinks many Chinese cities could lower their mortgage interest rates to the minimum level.

“Lowering interest rates on home loans will lower home buying costs for buyers, boost market confidence and activate market expectations for the real estate market,” Chen said.

Market Disruption

Currently, the housing market recovery has been halted by the current Covid-19 outbreaks in some Chinese cities, which means it may take some time for existing measures to take effect, Chen adds.

Chen says demand in the second quarter may continue to remain at low levels due to continued contagion and “a gradual market recovery may set in in the second half.”

Li Yujia, chief researcher at the Guangdong Provincial Residential Policy Research Center, says first-tier cities, on the other hand, have limited room for home loan interest rates to continue to fall, due to their solid fundamentals.

Demand in the country’s biggest cities, although temporarily confined by the epidemic, will pick up as soon as the pandemic is under control, Li added.

Yesterday, at least 56 cities announced respective policies to stabilize their national markets in May, the Securities Times reported, citing statistics from Centaline Property.

These measures are distinguished by new features, experts say. – Chinese Daily/ANN

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