During a press conference held on October 17th, the State Council Information Office discussed measures to promote the stable and healthy development of the real estate market. Tao Ling, the Deputy Governor of the People’s Bank of China, shared insights regarding the upcoming adjustments to existing mortgage loans, which are expected to be completed by October 25th. This means that borrowers will be able to check the results through designated channels of their lending banks as early as October 26th.
Tao emphasized the central bank’s commitment to financial macro-prudential management, outlining the financial policies designed to support the real estate market’s stability. Here are the key points of the policies discussed:
The first policy involves lowering the interest rates on existing mortgages. Recognizing the significance of mortgage rates for countless households, this measure aims to implement the decisions made by the central government, address the financial concerns of the people, and enhance living standards. On September 29th, the People’s Bank announced initiatives to refine the pricing mechanism for commercial personal housing loans, alongside a self-discipline proposal from the market interest rate pricing self-discipline mechanism. By October 12th, major commercial banks had released operational details, and banks are currently working diligently to revise contracts and systems. Most existing mortgage adjustments are anticipated to be finalized by October 25th, allowing for results to be viewed by borrowers on the 26th. Some smaller banks might experience slight delays, but overall completion is expected by October 31st.
To simplify the process, the majority of borrowers won’t need to visit bank branches. For those with floating rate mortgages, banks will automatically adjust rates without requiring applications, affecting over 90% of existing mortgages. Borrowers with fixed-rate loans can manage their adjustments through their bank’s online platforms without having to visit a branch. However, those who obtained their loans from smaller banks may need to visit in person due to less developed networks; more details will be provided by the lending banks.
The second policy standardizes the minimum down payment ratio for mortgages at 15%. This initiative supports both rigid and improved housing demand. Following the announcement of this policy on September 24th, the central bank instructed local branches to adapt their strategies according to local conditions and collaborate with city governments for swift implementation. Most cities, aside from the three first-tier cities of Beijing, Shanghai, and Shenzhen, no longer differentiate between first and second homes, now uniformly setting the minimum down payment at 15%. Many cities have simultaneously adjusted other real estate control policies, leading to increased market confidence and improved sales.
The third policy extends the duration of two existing real estate finance policies. On September 29th, the central bank and the financial regulatory authority jointly issued a notice regarding these adjustments. The first adjustment pertains to the “Financial 16 Policy” from November 2022, allowing for a one-year extension on loans due within the next six months without altering loan classifications. This extension, originally set to expire at the end of 2024, has now been pushed to the end of 2026. The second adjustment relates to the regulation of commercial property loans, which has been relaxed to better support companies with stable operations and positive business prospects.
The fourth policy enhances the re-lending policy for affordable housing, a structural monetary policy tool. On May 17th, the central bank announced a 300 billion yuan re-lending initiative to encourage banks to offer loans supporting the acquisition of unsold completed properties for affordable housing. As of September 24th, the central bank, in conjunction with the Ministry of Housing, revised this program to increase the proportion of re-lending funds from 60% to 100%. This aims to further stimulate the acquisition of existing properties and boost the market. Notifications were sent out on September 29th, allowing commercial banks to begin applying for re-lending from October, with some already having made requests.
Lastly, the fifth policy focuses on supporting the acquisition of existing land held by housing enterprises. The central bank, along with various departments, is actively studying options to allow policy banks and commercial banks to issue loans for this purpose, with necessary re-lending support from the central bank.
Tao pointed out that, overall, the recent package of financial policies, including interest rate cuts and reserve ratio reductions, will continue to play a positive role in bolstering confidence and stabilizing expectations in the real estate sector.