Two departments: Gradually reducing the interest rates of existing housing loans in an orderly manner.

On August 31, the People's Bank of China and the China Banking and Insurance Regulatory Commission jointly issued the "Notice on Adjusting and Optimizing Differentiated Housing Credit Policies" and the "Notice on Matters Related to Reducing the Interest Rates of Existing First Home Loans." Officials in charge answered questions from reporters regarding the policy adjustments.

Q: What is the background for the adjustment and optimization of differentiated housing credit policies?

A: On July 24, the Central Political Bureau meeting clearly stated the need to adjust and optimize real estate policies in a timely manner in response to significant changes in the supply and demand relationship in China's real estate market. The meeting emphasized the need to implement differentiated policies based on local conditions and make good use of policy tools. On July 31, the State Council executive meeting proposed launching policy measures conducive to the stable and healthy development of the real estate market based on different needs and different cities, and accelerating the research and construction of a new development model for the real estate industry.

In order to implement the decisions and arrangements of the CPC Central Committee and the State Council, the People's Bank of China and the China Banking and Insurance Regulatory Commission issued a notice to adjust and optimize the current differentiated housing credit policies. The notice supports local authorities in implementing differentiated policies based on local conditions and guides the downward adjustment of the actual down payment ratio and interest rates for individual housing loans, in order to better meet the demand for both primary and improved housing.

Q: What are the key points of this adjustment and optimization of differentiated housing credit policies?

A: First, it is to unify the minimum down payment ratio policy for commercial individual housing loans nationwide. There will no longer be a distinction between cities implementing "purchase restrictions" and those that do not. The minimum down payment ratio for both first and second homes will be unified at no less than 20% and 30% respectively.

Second, the minimum interest rate policy for second homes will be adjusted to no less than the corresponding period's Loan Prime Rate (LPR) plus 20 basis points. The minimum interest rate policy for first homes will remain no less than the corresponding period's LPR minus 20 basis points.

Local authorities can independently determine the minimum down payment ratio and interest rate limits for first and second homes within their jurisdiction based on the principle of differentiated policies according to local real estate market conditions and control needs.

Q: Why lower the interest rates of existing first home loans?

A: In recent years, there have been significant changes in the supply and demand relationship in China's real estate market, and both borrowers and banks have called for orderly adjustments and optimizations of their assets and liabilities. The reduction of interest rates on existing home loans can save borrowers interest expenses, which is conducive to expanding consumption and investment. For banks, it can effectively reduce prepayment and mitigate the impact on interest income. At the same time, it can also limit the improper use of operating and consumer loans to replace existing home loans, reducing hidden risks. In order to better adapt to the new situation mentioned above, the People's Bank of China and the China Banking and Insurance Regulatory Commission clearly support and encourage banks to negotiate with borrowers to adjust the interest rates of existing first home loans based on market-oriented and rule-of-law principles.

Q: Which existing first home loans are eligible for applying for a lower interest rate? How to apply?

A: Eligible existing first home loans refer to commercial individual housing loans that have been issued by financial institutions before August 31, 2023, as well as loans that have signed contracts but have not been issued, and the borrower's actual housing situation meets the first home standards of the city where they are located.For eligible existing housing loans, starting from September 25, 2023, borrowers can proactively apply to the lending bank, and banks are also encouraged to provide more convenient services to borrowers through methods such as public announcements and batch processing. In terms of adjustment methods, the markup rate of the housing loan as stipulated in the contract can be changed, or the bank can issue new loans to replace the existing loans. The specific adjustment range of interest rates shall be determined through negotiation between the borrower and the lender, but the adjusted interest rate cannot be lower than the lower limit of the first-home housing loan interest rate policy in the city where the original loan was issued. The newly issued loans can only be used to repay existing loans and will still be included in the management of commercial personal housing loans.

The People's Bank of China and the China Banking and Insurance Regulatory Commission will closely monitor market dynamics, guide banks and customers to conduct independent negotiations in accordance with market-oriented and rule-of-law principles, and orderly reduce interest rates on existing housing loans to maintain a healthy market competition order.