China's major banks to lower rates on existing first-home mortgages

China's major banks to lower rates on existing first-home mortgages

Four of China's major state banks said on Thursday they will start to lower interest rates on existing mortgages for first-home loans, reducing them to levels in place when a home was purchased.

Industrial and Commercial Bank of China Ltd (ICBC), China Construction Bank (OTC:CICHF) Corp, Agricultural Bank of China (OTC:ACGBF) and Bank of China issued separate statements announcing the planned reduction.

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The reduction will come into effect on Sept. 25, they said.

Chinese brokerage China International Capital Corp Ltd (CICC) expected the average reduction for first home buyer's mortgage rates would be 50 basis points (bps), and it could save them about 200 billion yuan ($27.31 billion).

CICC estimated that loans to first home buyers account for about 80%-90% of total outstanding mortgages.

Chinese regulators announced the policy to help homebuyers last week amid several other support measures announced by Beijing in recent weeks amid mounting concerns over the health of the world's second-largest economy.


The property sector, which accounts for roughly a quarter of the economy, has lurched from one crisis to another since 2021, and contagion fears deepened this month after liquidity stress in leading developer Country Garden became public.

China's home loans totalled 38.6 trillion yuan ($5.3 trillion) at the end of June, representing 17% of banks' total loan books.

Currently, the national floor of first-home loans stands at 20 basis points below the benchmark lending rate 5-year Loan Prime Rate(LPR) - currently 4.2%. Some big cities carry higher floor rates.

The mortgage rate cuts will put more pressure on banks' margins at a time when the government is expecting them to do more to support the economy. To cushion the impact, banks on Friday cut interest rates on a range of yuan deposits.

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