BEIJING (Reuters) – China’s central bank said on Friday it would cut the interest rate on housing provident fund loans by 0.15 percentage points for first-time home buyers from October 1, suggesting that there is an urgent need for policymakers to support the struggling real estate market.
The move follows the Department of Finance’s tax refund policy and the easing by the central bank and the banking regulator of a floor on mortgage rates for some first-time home buyers, as part of an effort by the authorities to stabilize the struggling housing market.
China last adjusted the housing provident fund interest rate in 2015.
Following the rate cut, the 5-year-and-under interest rate for first-time buyers borrowing from the government’s housing provident fund to finance the purchase of a home would remain at 2.6%, while the 5-year rates above would remain at 3.1%, the People’s Bank of China (PBOC) said in a statement posted on its website.
The fund’s interest rate for the purchase of second homes by buyers remained unchanged, the PBOC said.
“Lower interest rates for housing provident fund loans target homebuyers with rigid housing demand,” said Yan Yuejin, research director of the E-Research and Development Institute. house China based in Shanghai.
“Such a move, coupled with policy support from the Ministry of Finance today and central bank policy yesterday, are the three main stimulus measures aimed at stabilizing the housing market. They will remarkably strengthen the housing market in the fourth quarter. .”
China braces for a deepening housing crisis – a major drag on the world’s second-largest economy, as homebuyers refuse to make mortgage payments on unfinished buildings and financial difficulties for developers hurt more confidence in the sector.
The PBOC pledged to “fully utilize policy tools based on local conditions to support housing demand from buyers and renovators” in a statement after a quarterly meeting of its monetary policy committee.
The Ministry of Finance said Friday that China will refund personal income tax to homebuyers if they sell their home and buy a new one in the same city within a year of the sale, starting Saturday. until the end of 2023.
The central bank said Thursday that Chinese local governments may gradually ease the floor on mortgage rates for first-time home buyers in some cities.
(This story refiles to change source for paragraph 9 to Quarterly Meeting Statement, from Quarterly Monetary Policy Report)
(Reporting by Ellen Zhang, Liangping Gao and Ryan Woo; Additional reporting by Twinnie Siu and Ella Cao; Editing by Paul Simao)