The People's Bank of China: Actively and effectively reducing existing mortgage interest rates will benefit the medium and long term
Zou Lan, Director of the Monetary Policy Department of the People's Bank of China, revealed the latest progress in reducing existing mortgage interest rates in Beijing on the 20th. He said that the policy has been actively and effectively promoted, and this adjustment will benefit the medium and long term.
In order to better adapt to the new situation of China's real estate market, the People's Bank of China and the State Administration of Financial Supervision recently issued a document allowing commercial banks to reduce the interest rates on eligible first-home mortgages starting from September 25. They can choose to have new housing loans issued by commercial banks as replacements, or they can negotiate to change the interest rate agreed in the contract.
Zou Lan said at the State Council's regular policy briefing held on the 20th that considering that the duration of housing loans can be up to 30 years, and the time, region, and individual differences of different loans are large, the central bank has maintained close communication with major banks after the policy was announced, guiding banks to refine policy implementation plans in accordance with the principles of marketization and rule of law, and provide convenience to borrowers as much as possible.
He said that on September 7, four major state-owned banks in China issued an announcement stating that for existing floating-rate first-home loans priced with reference to loan market quotation rates, interest rates would be proactively adjusted in batches on September 25, the first day of policy implementation. The entire process does not require any action by the borrower. For other situations such as "converting second home to first home", borrowers can apply to the bank and provide supporting materials starting from September 25, and the bank will make batch adjustments to the approved businesses. The interest rates for most existing first-home mortgages that meet the requirements will be reduced to the quoted interest rate. After May 2022, the interest rate will be reduced to the quoted interest rate minus 20 basis points, directly lowering to the lower limit of the policy. Small and medium-sized banks are also successively formulating and issuing implementation details with reference to state-owned banks.
Zou Lan said that it is expected that more than 90% of eligible borrowers can fully enjoy the policy dividends as soon as possible, and the existing mortgage interest rates of other borrowers will also be adjusted before the end of October.
Zou Lan further pointed out that the benefits of this policy adjustment are medium and long-term, and can sustainably reduce expenditures for households that have taken loans with higher interest rates in recent years to buy houses, support the improvement of residents' spending power, and effectively promote consumption growth. The central bank will continue to pay close attention to market dynamics, maintain the order of market competition, and promote the smooth and orderly implementation of existing mortgage interest rate adjustments.
