Thecover.cn:

The Central Economic Work Conference proposed to ensure the stable development of the housing market; what measures will the PBC introduce? Some people believe that the housing market should be stabilized by cutting interest rates, especially mortgage rates. What is the PBC's view? Thank you.

Zou Lan:

I have already covered your first question in my previous answer. I'll focus on the second question about interest rates.

The policy of home loan rates will affect specific interest rates that are negotiated and confirmed between commercial banks and customers. Specific interest rates are directly related to monthly mortgage payments, so this is a very important policy. Last September, the PBC and the China Banking Regulatory Commission (CBRC) released a notice that clarified how governments of eligible cities could independently decide to temporarily relax the lower limit of interest rates for new first-home loans in the fourth quarter. After introducing this policy, some local governments actively made relevant adjustments, which led to a certain decrease in the interest rates of new home loans. According to the statistics we have, the national average interest rate for newly issued personal housing loans in December 2022 was 4.26%, down by 1.37 percentage points year on year, which is the lowest since the statistics began in 2008. The newly adjusted policy mainly aims to establish a dynamic mechanism for first-home mortgage rates. We have seen the policy show effect, and will, in accordance with the principle of "city-specific housing policies", allow cities to adjust the lower limit for the rate in phases based on changes in local home prices, so as to form a long-term mechanism to support a stable and healthy development of the housing market.

As for property prices, NBSC publishes year-on-year and month-on-month statistics of housing prices from 70 large and medium-sized cities on a monthly basis. Relevant local government departments have the statistics for the cities not included in these reports. After analyzing historical data for the 70 cities, it has been found that housing prices show clear periodic fluctuations. Three consecutive months of rise or decline could indicate a trend change in housing prices. It often takes quite a long time to form this trend change. According to the new policy, although local governments evaluate housing price changes in each quarter, it might take a longer cycle than the evaluation cycle to adjust the lower limit of the home loan rates when the trigger conditions are reached. That is to say, the home loan rate policy is dynamically adjusted according to housing price trends; at the same time, the policy also has strong stability. After the establishment of the dynamic mechanism, the new policy of first-home loan rates will be implemented through two-way, dynamic, and flexible adjustments under the city-specific housing policies. It will not only effectively support local governments that face greater difficulties in the housing market to make full use of the policy toolkit but also guide the governments of cities with rising housing prices to withdraw in a timely manner so as to promote the steady and healthy development of the local housing market. 

Thank you.