China has taken significant measures to lower borrowing costs on a massive $5.3 trillion worth of mortgages, benefiting millions of families in a bid to stabilize the struggling property sector.
According to a statement released by the People’s Bank of China on Sunday, homeowners will have the opportunity to renegotiate terms with their current lenders starting from November 1. Individuals who have selected fixed mortgage rates will also have the opportunity to renegotiate new loans based on the latest loan prime rate, which serves as a benchmark for mortgage loans.
This initiative highlights Beijing’s resolve to address the prolonged downturn in the housing market that has been weighing on the growth of the world’s second-largest economy.
PBOC Governor Pan Gongsheng stated in September that the measures will lower outstanding rates for individual borrowers by an average of 50 basis points, leading to a decrease in their annual interest expenses by approximately 150 billion yuan ($21 billion).
Typically, banks adjust existing loans at the start of the year based on the five-year loan prime rate, which has already been reduced by 35 basis points.
A similar mortgage refinancing initiative last year led to an average reduction of outstanding rates by 73 basis points, leading to a cut in annual interest expenses for borrowers by around 170 billion yuan, according to a report from the PBOC in July.
