China property: will mortgage rates at 13-year low help Beijing attract buyers back to stagnant market?

Mortgage rates for first homes in 100 cities have fallen to 4.09 per cent from a peak of 5.74 per cent in September 2021, according to data compiled by Beike Research Institute

Backed by Beijing’s 16-point policy, local governments have more room to optimise their policies and stimulate demand, analyst says

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A construction site in Shenzhen. Photo: Bloomberg

Published: 8:30am, 28 Nov 2022

China’s efforts to attract more buyers to the housing market and rebuild a major pillar of economic growth are being aided by a key advantage: average borrowing costs have fallen to a 13-year low and are possibly cheaper in certain cities.

Mortgage rates for first homes in 100 mainland Chinese cities have fallen to 4.09 per cent from a peak of 5.74 per cent in September 2021, according to data compiled by Beike Research Institute. In Qingyuan city in southern Guangdong province, for example, rates have dropped to as low as 3.7 per cent.

This means that homebuyers in Qingyuan can save as much as 0.35 million yuan (US$48,953) on a 30-year home loan of 1 million yuan, according to Beike Research.

The People’s Bank of China (PBOC) and the China Banking and Insurance Regulatory Commission (CBIRC) earlier this month spelled out plans to ensure a “stable and healthy development” of the sector amid an industry slump. The notice included 16 measures to ease a liquidity crunch crippling private developers and lower down payments for home purchases.

“Backed by the 16-point policy, which clarifies the floor level of mortgage rates for individual houses, local governments have more room to optimise their policies to stimulate demand,” said Liu Lijie, an analyst at the institute. “Mortgage rates for first homes could be shaved further.”