A number of commercial banks in China started to reduce interest rates on existing housing mortgage loans on Friday, following the central bank’s cut to mortgage rates.
China’s six major commercial banks have already reduced existing mortgage rates to no less than 30 basis points (bps) below the loan prime rate (LPR), with multiple joint-stock commercial banks set to follow suit, including the Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, Bank of Communications, China Construction Bank, and Postal Savings Bank of China.
After the adjustments, existing mortgage rates were cut by about 50 bps on average.
Commercial banks said that the mortgage rates will be adjusted automatically by the banks, and no individual applications are required from customers. “Existing Mortgages Adjustment” was one of the trending search topics across the APPs of these commercial banks on Friday.
The adjustments could benefit an estimated 50 million households and 150 million people by shaving about 150 billion yuan ($21 billion) off their interest payments, said Tao Ling, deputy governor of China’s central bank, at a press conference previously.
In Beijing, for example, if the original mortgage interest rate is 4.4 percent, the interest rate is now adjusted to 3.55 percent. If a person takes out a 1 million yuan ($140,402), 25-year mortgage with the same amount of principal and interest, they can pay $469 less per month, saving a total of more than 140,000 yuan ($19,656) in interest expenses.
Recent stimulus measures have boosted the housing market in China, particularly in major cities, with sales of new and existing homes increasing steadily. All these measures aim to promote domestic consumption and investment, thereby driving sustained economic growth.
