China’s central bank has reduced its mortgage rate to stabilize the property market.
The People’s Bank of China (PBOC) reduced the prime rate (LPR) for five-year loans by 1.5 percentage points, matching its largest reduction on record.
Some construction projects have halted in the world’s second-largest economy as a result of a property crisis.
Lockdowns as a result of the country’s stringent zero-Covid policies have an impact on both enterprises and consumers.
The PBOC decreased the five-year rate to 4.2% on Monday, which will reduce the cost of mortgage payments across the nation.
Additionally, the prime rate for one-year loans, which is typically used to assess corporate loans, was reduced from 3.7% to 3.65%.
Iris Pang, chief economist for Greater China at ING Bank, stated that the measures are part of a larger effort to stabilize the real estate industry.
“At the same time, some local governments have begun lending to real estate developers to continue the development of unfinished homes,” she said in a Monday letter.
“The combination of the two steps should lessen the anxiety of existing mortgage customers,” she added.
It is believed that China’s property crisis reduced the sector’s worth by more than a trillion dollars in the past year.
The number of homes sold in China has decreased for eleven consecutive months, according to government data. This is the longest decline since China’s private property market was established in the late 1990s.
Due to financial problems, several Chinese developers have suspended construction on previously sold homes.
Hundreds of homebuyers have reportedly vowed to stop paying their mortgages until construction resumes.
In the meantime, the Chinese government has indicated that the nation may fall short of its annual economic growth objective of 5.5%.
After its July quarterly economic conference, the Communist Party’s top policymaking body, the Politburo, did not reference the official growth target. It only stated that leaders “would try to obtain the greatest possible results.”
Premier Li Keqiang of China stated last week that the government will take additional initiatives to increase domestic consumption and investment.
This occurred after consumption and output indicators unexpectedly slowed.
