China’s central government is allowing nearly two dozen cities to lower mortgage rates for purchases of primary residences, in a move analysts said was likely to provide only limited help for the country’s struggling housing market.
Eligible cities will be able to maintain, lower or remove the minimum interest rates set for loans that go toward primary-home purchases in their jurisdiction, according to a statement from the central bank and banking regulator. The permission will last through year-end.
The new rates can be negotiated between banks and their customers, the regulators said.
The new policy will apply to cities where newly constructed housing prices declined during the June-through-August period both compared with the previous three months and with the same period of 2021, according to the statement. Existing rules for second-home mortgage loans remain unchanged.
New home prices in China’s top 70 cities dropped 0.29% in August from July and were down 2.1% from a year earlier. Downward pressure on home prices was seen across the nation last month, with the trend worst in third-tier cities, where declines accelerated.
Prior to the policy change, Chinese banks already could cut mortgage rates to a record low of 4.1%, after the five-year loan prime rate was reduced this month to boost housing demand. Earlier on Thursday, the central bank vowed to accelerate usage of targeted loans to ensure delivery of delayed property projects.