Chinese banks lean towards mortgage rate cuts, heeding Beijing’s call to make homes more affordable and arrest housing slump

Several Chinese banks have made pledges to cut mortgage rates, answering Beijing’s call to make homes more affordable and help arrest a multi-month slump in the nation’s housing market, according to various reports, a move which analysts said will have a big impact on lenders’ net interest margins.

The pledges follow the central bank’s indication it would guide commercial banks to adjust existing mortgage rates in its quarterly monetary policy report, which analysts interpreted as a sign that reductions in borrowing rates are forthcoming.

In another move that seeks to support the beleaguered sector, Guangzhou’s government authorities bureau announced plans to ease mortgage curbs. In a statement on its official website, the city government said it would allow more homebuyers to enjoy preferential loan rates for first-home purchases regardless of their credit history.

Bank of Communications, China’s fifth-largest bank, or BoCom, as the lender is known, held an internal meeting to “initiate the project to adjust the existing mortgage rates on personal home loans,” according to a notice obtained by the Post. The bank’s investor relations officers said they are not authorised to disclose information to the public about the meeting.

Other local commercial banks have also mentioned potential rate cuts during their recent earnings calls. CITIC Bank is “closely monitoring regulator directions and market movements” while making plans for adjustments.” China Merchant Banks said a cut is “imperative” pending a final decision, its president Peng Jiawen said.