[Traderknows reported on September 24] Today, the State Council Information Office held a press conference where key officials from the People's Bank of China, the Financial Regulatory Administration, and the China Securities Regulatory Commission introduced several policies related to financial support for high-quality economic development. Numerous significant measures were introduced aimed at further strengthening monetary policy regulation to support stable economic growth.
The principal official of the People's Bank of China stated that, in regard to mortgage policies, the interest rates on existing mortgages will be lowered and the minimum down payment ratio for mortgages will be standardized nationwide. The specific measures include:
- Reduction of existing mortgage interest rates: Commercial banks will be guided to lower the interest rates on existing mortgages to levels close to new mortgage rates, with an expected average reduction of about 0.5 percentage points.
- Adjustment of the minimum down payment ratio: The minimum down payment ratio for second homes nationwide will be reduced from 25% to 15%, aligning it with the minimum down payment ratio for first homes.
According to industry analysis, the current average interest rate on existing mortgages is about 3.92%. Zhang Dawei, Chief Analyst at Centaline Property, noted that if the interest rate on existing mortgages is reduced by 50 basis points, for a commercial loan of 1 million yuan over a 30-year term, the monthly payment would decrease by about 280 yuan, reducing the total interest expense over 30 years by approximately 100,000 yuan.
Economic Reasons for the Reduction
China's recent policy to lower the interest rates on existing mortgages and adjust the minimum down payment ratios reflects multiple considerations in response to macroeconomic pressures:
- Promoting stable economic growth: Against the backdrop of increased global economic uncertainty and a slowdown in domestic economic recovery, the government aims to stimulate demand in the real estate market by lowering mortgage rates and down payment ratios, thereby driving the development of related industries. This helps boost domestic demand and stabilize overall economic growth expectations.
- Alleviating homebuyers' pressure and boosting consumer confidence: High housing prices have long been a significant burden for Chinese families. Lowering mortgage rates and down payment ratios will effectively reduce the financial pressure on homebuyers. By easing monthly payment burdens and lowering the threshold for home purchases, the government hopes to boost consumer confidence, thereby promoting overall consumption recovery, which is a key driver of economic growth.
- Supporting the stable development of the real estate market: In recent years, China's real estate market has shown signs of adjustment and cooling, with some cities even facing inventory backlogs and declining housing prices. By lowering mortgage rates and down payment ratios, the government aims to stabilize the real estate market and prevent excessive downturns that could negatively impact the economy, ensuring the healthy and stable operation of the real estate market.
- Continuation of monetary policy regulation: The introduction of these policies also represents a continuation of the adjustment of monetary policy to a more accommodative stance. As major global economies have moved towards rate cuts or accommodative policies, China also hopes to inject liquidity into the real economy through enhanced monetary policy regulation, reduce financing costs, and ensure economic operations remain within a reasonable range.
In summary, lowering mortgage rates and adjusting down payment ratios reflect the Chinese government's policy direction in addressing downward economic pressures by boosting the real estate market and consumer confidence, stabilizing economic growth, and optimizing the allocation of financial resources. This strategy not only helps stabilize the real estate market but also provides strong support for a broader economic recovery.
