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August 26, 2019

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China acts to regulate property market

Source: Xinhua | 00:00 UTC+8 August 26, 2019 | Print Edition

China has decided to set its interest rates for commercial individual housing loans in a more market-based manner in its latest move to regulate the property market’s growth.

Central bank announced yesterday it will replace the loan benchmark interest rate with the loan prime rate as a benchmark for setting the interest rate of newly issued commercial individual housing loans.

The decision came after the People’s Bank of China last Saturday unveiled a plan to improve and reform the country’s LPR mechanism. Disclosed on the 20th day of every month, the LPR functions as a market-based reference for lenders to set their loan interest rates.

Starting from October 8, the interest rate of newly issued commercial individual housing loans will be based on the latest month’s LPR of the corresponding term, while certain basis points will be added, the PBOC said in a statement.

The basis point addition should be in line with national and local housing credit policies and unchanged during the housing loan contract term.

The housing loan interest rate for first-time buyers should not be lower than the LPR of the corresponding term, while that for second-time buyers should not be lower than the combined level of the LPR and 60 basis points. The loan interest rate for commercial-purpose housing should not be lower than the combined level of the LPR of the corresponding term and 60 basis points, while interest rate policies for individual housing loans via one’s housing provident fund will stay unchanged.

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