Chinese financial authorities yesterday allowed a further cut in mortgage loan interest rates for some home buyers.
For purchases of first homes, commercial banks can reduce the lower limit of interest rates on home loans by 20 basis points, based on the corresponding tenor of benchmark Loan Prime Rates (LPRs), the People’s Bank of China (PBOC) and China’s Banking and Insurance Regulatory Commission said in a statement.
The cut aims to support demand and promote stable and healthy development of the real estate market, the statement said.
In its monthly fixing in April, the PBOC kept its one-year LPR unchanged at 3.70% and the five-year LPR, typically used as a benchmark for mortgage loans, steady at 4.60%.
Banks in many cities cut mortgage rates in the first quarter following calls from authorities to support buyer sentiment in a market rocked by a liquidity crunch and troubled developers last year, and now by COVID-19 outbreaks.
“Policies including lowering down-payments, lowering mortgage interest rates, loosening restrictions on secondhand housing sales and loosening purchase restrictions will create better conditions for active market transactions in mid-to-late May,” said Yan Yuejin, research director of Shanghai-based E-house China and Development Institute.
The latest loan guidance came after central bank data Friday showed new bank loans plunged to their lowest in four years in April.
To free up more funds for lending, the PBOC on April 25 reduced the amount of cash that lenders must set aside as reserves.