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Mortgage payers set to gain most from rate cuts
By Cherry Cao |
June 9, 2012, Saturday
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Print Edition
Print Edition
CHINA'S unexpected interest rate cuts, effective yesterday, will likely have a positive, though not major, impact on the country's housing market, industry analysts said.
"This is absolutely good news for mortgage payers but the amount involved is still far from attractive to coax potential buyers to enter a deal if we consider the average cost of a home in Shanghai," said Gong Min, a senior manager at Shanghai Centaline Property Consultants Ltd, operator of the city's largest estate chain in terms of transaction value.
The 0.25-percentage-point cut on the benchmark one-year lending rate will allow mortgage payers to pay 150 yuan less each month for a 20-year, 1 million yuan (US$158,000) mortgage. However, prices of new homes, excluding government-subsidized affordable housing, still stood at a high of 22,450 yuan per square meter on average in the city last month, according to data released by Shanghai Deovolente Realty Co.
A Barclays report released yesterday estimated that the latest rate cuts will only have the equivalent effect of a 2 percent cut in home prices.
The move, which allows banks to set lending rates at as low as 80 percent of the benchmark, or 10 percentage points lower than previously, has also made a 20 percent discount on mortgage rates for first-time homebuyers possible, compared with the current ceiling of 15 percent.
"Reduced burden for all mortgage payers, as well as larger discounts available for first-time buyers in particular, may boost confidence among homebuyers and possibly trigger sales in the coming months," said Huang Hetao, research manager at Century 21 China Real Estate, the city's No. 1 realtor in terms of outlet numbers.
In a separate announcement, the Ministry of Housing and Urban-Rural Development cut public housing fund lending rates from yesterday. The five-year fund lending rate is 4.2 percent, down 0.25 percentage points, while longer lending rate has been lowered to 4.7 percent from 4.9 percent.
"This is absolutely good news for mortgage payers but the amount involved is still far from attractive to coax potential buyers to enter a deal if we consider the average cost of a home in Shanghai," said Gong Min, a senior manager at Shanghai Centaline Property Consultants Ltd, operator of the city's largest estate chain in terms of transaction value.
The 0.25-percentage-point cut on the benchmark one-year lending rate will allow mortgage payers to pay 150 yuan less each month for a 20-year, 1 million yuan (US$158,000) mortgage. However, prices of new homes, excluding government-subsidized affordable housing, still stood at a high of 22,450 yuan per square meter on average in the city last month, according to data released by Shanghai Deovolente Realty Co.
A Barclays report released yesterday estimated that the latest rate cuts will only have the equivalent effect of a 2 percent cut in home prices.
The move, which allows banks to set lending rates at as low as 80 percent of the benchmark, or 10 percentage points lower than previously, has also made a 20 percent discount on mortgage rates for first-time homebuyers possible, compared with the current ceiling of 15 percent.
"Reduced burden for all mortgage payers, as well as larger discounts available for first-time buyers in particular, may boost confidence among homebuyers and possibly trigger sales in the coming months," said Huang Hetao, research manager at Century 21 China Real Estate, the city's No. 1 realtor in terms of outlet numbers.
In a separate announcement, the Ministry of Housing and Urban-Rural Development cut public housing fund lending rates from yesterday. The five-year fund lending rate is 4.2 percent, down 0.25 percentage points, while longer lending rate has been lowered to 4.7 percent from 4.9 percent.
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