Mortgage rates in China have come down to the lowest level since 2008 after lenders slashed their five-year loan prime rate (LPR) by 25 basic points earlier this month, the first cut since last June, reports Caixin. The average borrowing rate for first-time home buyers came down to 3.59% this month, while the average for second home buyers was 4.16%, both a decline of 25 basis points from a year ago, according to think tank Beike Research Institute’s study of 100 cities.
Under the mortgage reform system in place since 2019, the interest rate of a new personal housing loan is based on a five-year LPR. Provincial branches of the central bank determine the minimum rates according to local property markets, with each commercial bank setting its own mortgage rate for each loan after taking into account their own business conditions, customer risk status and credit conditions.
Chinese lenders cut their five-year LPR by 25 basis points to 3.95%, the People’s Bank of China (PBOC) announced Feb. 20. It was the first cut since June and the largest reduction since a revamp of the rate was rolled out in 2019. Previous cuts were 15 basic points at most.