China's central bank, the People's Bank of China (PBC) announced on Sunday a critical step to revive fragile economy by directing banks to significantly reduce mortgage rates on existing home loans by the end of October. Under PBC's anticipated measures, the banks are expected to cut existing mortgage rates by at least 30 basis points below the Loan Prime Rate (LPR). This translates to an average reduction of around 50 basis points. This follows a series of policies implemented this year, including down payment reductions and previous mortgage rate cuts, all aimed at stimulating the ailing property sector. The new policy targets existing homeowners burdened by higher-rate mortgages, a problem that discouraged spending and weighed on the economy. Adding to such efforts, Guangzhou city announced on Sunday removing all restrictions on home purchases. Additionally, Shanghai and Shenzhen said they would ease restrictions on housing purchases by non-local buyers and decrease the minimum downpayment ratio for first homebuyers to no less than 15 per cent. The PBC acknowledges the need for "urgent adjustments" due to the evolving real estate market and public concerns. Major state-owned banks have pledged to implement the policy and adjust existing mortgage rates. The move complements the PBC's recent extension of supportive measures for developers' financing needs until the end of 2026. The Chinese property market has faced a significant slowdown, with new home prices falling at a record pace and sales plummeting. Previous stimulus measures have had limited success in boosting sales or increasing liquidity. By easing the burden on existing homeowners, the PBC hopes to stimulate the property market and bolster domestic consumption. Overall, this aggressive rate cut for existing mortgages signifies China's determination to address the property market crisis and revitalize the broader economy. Attribution: Reuters
