N Video, Nanfang Metropolis Daily: 

The PBC announced a set of real estate financial policies on Sept. 24, which included measures such as lowering interest rates on existing mortgages and standardizing the down payment ratio for housing loans. Could you please introduce the progress of these policies? Thank you.

Tao Ling:

Thank you for your question. The PBC, based on its macro-prudential financial management responsibilities, has formulated and implemented financial policies to support the steady and healthy development of the real estate market. To help stabilize the real estate market and promote the establishment of a new development model, Pan Gongsheng, governor of the PBC, announced a package of five real estate financial policies at a press conference on Sept. 24. It has now been three weeks, and the social response has been positive, playing a constructive role in boosting market expectations and confidence. On Sept. 29, the PBC published the relevant policy documents on its website. Since you are all paying close attention, let me provide a more detailed introduction to the implementation and progress of these measures.

The first policy is to lower interest rates on existing mortgages. Mortgage rates affect the lives of millions of families, and lowering existing mortgage rates is a concrete measure to implement the decisions of the CPC Central Committee, take a people-centered approach to financial work and benefit people's livelihoods. Regarding progress, on Sept. 29, the PBC issued an announcement to improve the pricing mechanism for commercial personal housing loans. On the same day, the PBC guided the market interest rate pricing self-discipline mechanism to release a self-discipline initiative, and commercial banks also issued their announcements. On Oct. 12, major commercial banks published their operational guidelines. Currently, commercial banks are working around the clock to modify contracts and systems, making all necessary preparations. Most existing mortgages will be adjusted in bulk by Oct. 25, meaning individuals can check adjustment results through their lending banks' designated channels by Oct. 26. Some small- and medium-sized banks may complete adjustments slightly later, but all adjustments are expected to be completed by Oct. 31.

To make the process more convenient, the vast majority of borrowers will not need to visit bank branches. Borrowers with floating-rate mortgages do not need to submit any applications. Commercial banks will adjust these loans in bulk. This group of loans accounts for over 90% of existing mortgages. Borrowers with fixed-rate mortgages can handle the adjustments through their bank's online banking or mobile banking services without visiting bank branches. Due to the less-developed networks of some small- and medium-sized banks, borrowers who have mortgages with these banks may need to visit branches to complete the process. For more specific details, please pay attention to announcements from your respective lending banks.

Borrowers are also concerned about specific mortgage interest rates after the policy adjustments. We've seen many calculations and discussions about this in society, so let me provide a brief explanation. As you know, mortgage interest rates consist of the loan market quotation rate (LPR) plus a spread. According to policy adjustments, what is being modified is the spread. For existing mortgages with a spread greater than -30 basis points, the spread will be uniformly reduced to -30 basis points. For example, in Beijing, the lowest spread for first-time home loans was previously 55 basis points. With this adjustment, the lowest spread will be reduced to -30 basis points, meaning the mortgage rate will be reduced by 85 basis points. For second-home loans in Beijing, the lowest spread was previously 105 basis points. According to city-specific interest rate limits, the minimum spread will now be reduced to -5 basis points, resulting in a 110 basis point reduction in the mortgage rate. The reduction will be even more significant in areas outside Beijing's Fifth Ring Road.

After the adjustment of existing mortgage interest rates, how much can borrowers save? It is estimated that existing mortgage interest rates will see about a 0.5 percentage point reduction, resulting in total interest savings of approximately 150 billion yuan ($21 billion), benefiting 50 million households and 150 million residents. Commercial banks calculate that individuals and families in Beijing would see a mortgage rate of 4.4% drop to 3.55% after the adjustment. For a 1 million yuan, 25-year loan with equal principal and interest payments, the monthly payment will decrease by 469 yuan, saving over 140,000 yuan in total interest payments. Because the implementation of mortgage rate adjustments involves many operational details and varies by region and borrower type, please refer to specific policies and operational guidelines during actual processing.

The second policy unifies the minimum down payment ratio at 15% for both first and second homes. This measure aims to better support first-time homebuyers and those seeking to improve their housing situations. Since the policy's release on Sept. 24, the PBC has been guiding its branch banks nationwide, helping them adopt tailored measures based on local conditions, while working with local governments to ensure implementation. Currently, most Chinese cities have standardized the minimum down payment ratio for personal housing loans at 15%, regardless of whether the purchase is for a first or second home. Beijing, Shanghai and Shenzhen will adopt differentiated policies. Additionally, some cities have adjusted real estate market regulations, including purchase restrictions and taxes, which have bolstered market confidence and sales.

The third policy is to extend the term of two real estate financial policies. This policy aims to adjust the two policy documents issued earlier. On Sept. 29, the PBC and the NFRA jointly issued the notice for new adjustments. First, we adjusted the 16-point policy plan proposed in November 2022. According to the previous policy, property development loans and trust loans maturing within six months could be extended by one year without requiring reclassification. This policy helps stabilize housing enterprise financing and improve the financial conditions of the real estate sector. It was originally set to expire at the end of 2024. This time, we have decided to extend the policy term until the end of 2026. Second, we made some adjustments to the notice on managing commercial property loans issued in January 2024. According to this notice, the property developers with compliant operations and good prospects are allowed to use commercial property loans issued by national commercial banks to repay the loans or bonds related to real estate projects of such developers and their holding companies. This policy's expanded scope of loan usage helps bolster the financial position of housing enterprises. It was originally scheduled to expire at the end of 2024, but we have extended the policy term until the end of 2026 as well.

The fourth policy optimizes the relending policy for government-subsidized housing, which functions as a structural monetary policy tool. On May 17, the PBC announced a 300-billion-yuan relending facility for government-subsidized housing. The policy encouraged banks to issue commercial loans, and supported local state-owned enterprises in acquiring unsold completed commercial housing to be used as either sale-oriented or rental-oriented affordable housing. The primary goal of this policy is to promote the destocking of existing commercial housing. The PBC has established a special task force with the Ministry of Housing and Urban-Rural Development. Working through the urban real estate financing coordination mechanism, this task force collaborates with local governments to strengthen policy implementation. 

To better align with practical needs at the preliminary stage and to further enhance market-based incentives for banks and acquiring entities, the PBC decided to adjust and improve relevant policies. On Sept. 24, it increased its funding proportion by relending funds from 60% to 100%. This enhancement has helped further stimulate demand for existing commercial housing and accelerate destocking in the real estate market. The PBC officially issued a notice on Sept. 29, and commercial banks could begin relending applications to the PBC in October. Recently, several commercial banks have submitted applications. We believe that by working together, more progress will be made in the acquisition of existing housing stock.

The fifth policy supports the acquisition of property enterprises' land holdings. The PBC is working with relevant departments to develop new measures that allow policy and commercial banks to issue loans to qualified enterprises for acquiring housing enterprises' land inventory. The PBC will provide necessary special relending facilities to support this process. 

The PBC recently implemented various financial measures, including cuts to the reserve requirement ratio and interest rates. These monetary policies, along with the previously mentioned real estate initiatives, are expected to further strengthen market confidence and stabilize expectations.