China’s banks to lower mortgage rates amid housing slumps

Six of China’s biggest banks said they would tweak interest rates on mortgages for existing home loans following a request to lower them from Beijing’s central bank, state media said Monday, as the country seeks to pull itself out of a housing slump.

The measures are the latest in a raft of pledges out of Beijing since last week aimed at kickstarting the world’s number-two economy.

The teetering property sector has long accounted for around a quarter of gross domestic product and experienced dazzling growth for two decades.

But a years-long housing slump has become a major impediment to growth as the country’s leadership eyes a target of around five per cent this year — an objective analysts say is optimistic given the many headwinds the economy faces.

On Monday, the state news agency, Xinhua, said that China’s six major national commercial banks – including the Industrial and Commercial Bank of China, the Agricultural Bank of China and the Bank of China – had agreed to “adjust” mortgage rates for existing home loans.

The move followed a request by Beijing’s central bank that they lower the rates in a bid to reduce pressure on homeowners.

The rate adjustment will take place on October 31, Xinhua quoted the banks as saying.

Markets have rallied in Hong Kong and mainland China on the announcements amid hopes of greater support.

On Monday, stocks in Shanghai and Shenzhen soared on the news of more support for the housing market.

Property developers were among the big winners, with Kaisa shares rocketing almost 60 per cent, Sunac up more than 16 per cent and Fantasia piling on more than 30 per cent.

Earlier on Monday, three of China’s biggest cities said they would ease restrictions to make it easier for people to buy homes.

The southern megacities of Guangzhou and Shenzhen — home to a combined 37 million people — said prospective homebuyers would no longer be vetted for their eligibility.

In the centre of Guangzhou, where people were previously barred from owning more than two homes, there will no longer be any restrictions on how many a person can buy, the city said.

And in the eastern economic powerhouse of Shanghai — the country’s richest city — authorities said they would lower the minimum down payments on a home to 15 per cent from 20 per cent starting on Tuesday.