The People’s Bank of China (PBoC), China’s central bank, adjusted interest-rate mechanisms Sunday for the second time this month, focused on mortgage loans, in what it said was a bid to price them closer to market rates and in ways that might avoid further inflating property prices, said the Wall Street Journal.
The new policy came one week after the PBoC unveiled a new benchmark interest-rate system meant to more closely align with market signals. In the short term, the move could lower interest rates and make them more responsive to the central bank’s monetary-policy adjustments.
When authorities announced the new benchmark system, they said the changes wouldn’t affect the pricing of mortgage loans. Analysts read the move as further indication that Beijing is concerned that China’s already-high home prices would spike higher if borrowing rates were lowered. Now the central bank says future mortgage rates will be based on Loan Prime Rate (LPR), the new benchmark rate system, at the heart of the restructuring.
In a statement on Sunday, the PBoC said new mortgage loans would also be priced based on LPR from Oct. 8. New mortgage loan rates for first-home buyers should not be lower than related LPRs. It also said rates for second-home buyers have to be at least 60 basis points higher than LPRs.