China’s central bank sets new floors for mortgage rate in latest bid to curb speculation
- Rate for first-home buyers set at 4.85 per cent, while minimum for second-home buyers will be 5.45 per cent
- Analyst says the move will ‘help avoid property market overheating’
China’s central bank has set new floors for the country’s mortgage rate from October 8, in its latest move to curb property speculation, stabilise prices and control asset bubbles.
For first-home buyers, the mortgage rate floor will be the latest monthly loan prime rate (LPR), which was 4.85 per cent in August, the People’s Bank of China said in a statement on Sunday.
That is lower than the previous lending benchmark of 4.90 per cent, although some commercial banks extend a discount of 5 to 10 per cent to certain applicants.
For second-home buyers, the minimum rate must be at least 60 basis points higher than the loan prime rate. Provinces would be able to increase the rate depending on local economic conditions.
The minimum of 5.45 per cent, based on the August LPR, is slightly higher than the current 5.4 per cent, which is 1.1 times the old benchmark.
The central bank said the move would not add to homeowners’ interest payments as it would apply only to new mortgages. The 28 trillion yuan (US$3.95 trillion) in outstanding mortgages remained unchanged.