People's Bank of China: Continue to promote the smooth and orderly implementation of existing mortgage interest rate adjustments
According to the website of the State Council Information Office, the State Council Information Office held a regular briefing on State Council policies on the morning of September 20, 2023 (Wednesday). Cong Liang, deputy director of the National Development and Reform Commission, and relevant persons in charge of the Ministry of Industry and Information Technology, the Ministry of Finance, and the People's Bank of China interpreted the economic situation and policies and answered reporters' questions.
The following is the transcript of the press conference:
Reporter: Just now, Director Zou also mentioned the issue of lowering the interest rate on existing first-home loans. We also noticed that this is a new notice recently issued by the Central Bank and the State Administration of Financial Supervision. I would like to ask what are the main considerations for issuing this policy?
Zou Lan, Director of the Monetary Policy Department of the People's Bank of China: In recent years, the supply and demand relationship in my country's real estate market has undergone major changes, and borrowers and banks have demands for orderly adjustment and optimization of assets and liabilities. In order to better adapt to the new situation of the real estate market, on August 31, the People's Bank of China and the State Administration of Financial Supervision clearly allowed commercial banks to reduce the interest rates on eligible first-home mortgages starting from September 25. They can choose to have new housing loans issued by commercial banks as replacements, or they can negotiate to change the interest rate stipulated in the contract.
As far as we know, the reduction of existing mortgage interest rates has been actively and effectively promoted. Considering that the duration of a mortgage can be up to 30 years, and that different loans vary greatly in terms of time, region, and individual loans, after the policy was announced, we maintained close communication with major banks and guided banks to refine policy implementation plans in accordance with the principles of marketization and rule of law to provide convenience to borrowers as much as possible. On September 7, four major state-owned banks issued an announcement stating that for existing floating-rate first-home mortgages priced with reference to loan market quoted interest rates, they will proactively adjust interest rates in batches on September 25, the first day of policy implementation. The entire process does not require any action by the borrower. For other situations such as "converting second home to first home", borrowers can apply to the bank and provide supporting materials starting from September 25, and the bank will make batch adjustments to the approved businesses. The interest rates for most existing first-home mortgages that meet the requirements will be reduced to the quoted interest rate. After May 2022, the interest rate will be reduced to the quoted interest rate minus 20 basis points, directly lowering to the lower limit of the policy. Small and medium-sized banks are also successively formulating and issuing implementation details with reference to state-owned banks. It is expected that more than 90% of eligible borrowers can fully enjoy the policy dividends as soon as possible, and the existing mortgage interest rates of other borrowers will also be adjusted before the end of October.
The reduction in existing mortgage interest rates can save residents’ interest burden and significantly enhance their spending power. The benefits of this policy adjustment are mid- to long-term, and can sustainably reduce expenditures for households that have taken loans with higher interest rates in recent years, support the improvement of residents' spending power, and effectively promote consumption growth.
In the next step, the People's Bank of China will continue to pay close attention to market dynamics, maintain the order of market competition, and promote the smooth and orderly implementation of existing mortgage interest rate adjustments.
