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Montevideo, July 1st 2022 - 19:39 UTC

 

 

China cuts mortgage rates for first home buyers; combats real estate giants speculation

Monday, May 16th 2022 - 09:13 UTC
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Mortgage rates for first home buyers will benefit from a 20 basis points cut of the benchmark LPR (loan prime rate), in an attempt to accelerate urban sales Mortgage rates for first home buyers will benefit from a 20 basis points cut of the benchmark LPR (loan prime rate), in an attempt to accelerate urban sales

China wants to inject more dynamism to the housing market and the Central bank plus the insurance regulator announced on Sunday a significant interest rate cut for first home buyers. This follows on almost two years of rampant speculation among giant real estate companies that almost led to a collapse of the market.

Under the new system, mortgage rates for first home buyers will benefit from a 20 basis points cut of the benchmark LPR (loan prime rate), in an attempt to accelerate urban housing sales. However mortgage rates for second homes will remain unchanged.

A statement by the two organizations reiterated that housing is for living and not for speculation, noting that the policy change aims to promote the stable and healthy development of domestic real estate sector, while supporting and improving housing demand.

Analysts stressed that the change would give commercial banks more macro space for issuing mortgages, while the policy adjustment will encourage first-time home buyers to own a home at a lower cost.

The new policies will help guide local authorities and banks to cut the current mortgage rates, and also inspire more real estate enterprises to promote the sale of properties, Yan Yuejin, research director at Shanghai-based E-house China R&D Institute, said on Sunday.

Yan added that the policy change will significantly reduce the burden on home buyers, which is expected to work in tandem with other supportive measures by the government to bolster the economy.

New yuan loans in the country reached 645.4 billion yuan (US$95.12 billion) in April, dropping sharply from 3.13 trillion yuan for March, as a result of COVID-19 resurgences in major Chinese cities including Shanghai and Beijing.

Local responsible authorities across China can independently determine the range of mortgage rates reduction, in accordance with the new policy just released by the central bank and China Banking and Insurance Regulatory Commission. Earlier in January, the central bank cut one-year and five-year LPR by 10 and 5 basis points, respectively.

Tags: China.

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