What’s new: Shanghai, China’s financial hub, lowered downpayment ratios and the mortgage rate floor for first-time homebuyers, becoming the first among the country’s biggest cities to step up easing measures to shore up the ailing housing market.
The city of nearly 25 million residents reduced downpayment ratios by 10 percentage points to a minimum of 20% for first-time buyers. The ratio was lowered to 30% from 40% for second-home buyers, according to a Monday statement by the central bank’s Shanghai branch.
The floor for mortgage rates was also lowered to 3.5% in Shanghai, from 3.85%. The new policies take effect from Tuesday and banks can decide on their rates based on customers’ conditions, said the statement.
The context: Shanghai’s move follows the central government’s announcement last week of its most forceful policy package yet to prop up the housing market, which included easing mortgage rules and encouraging local governments to buy unsold homes.
As part of the measures, the central bank has pledged to provide 300 billion yuan ($41.4 billion) in cheap loans to enable financial institutions to lend to local state-owned enterprises so they can buy up built but unsold apartments and convert them to affordable housing.
Other measures include scrapping the nationwide minimum mortgage interest rate and cutting the minimum down-payment ratio.
As of Monday, more than 10 provinces have announced cuts in downpayment and mortgage rate requirements. With the exception of Shanghai, China’s biggest cities, including Beijing, Guangzhou and Shenzhen, have yet to adjust their mortgage rules.
Contact reporter Han Wei (weihan@caixin.com)
