China to Cut Rates on $5 Trillion Mortgages as Soon as September

Breakingviews - China mortgage cut is start of confidence rebuild

Rate cuts may boost consumer confidence

Some analysts believe that cutting mortgage rates could help rebuild confidence in the housing market and encourage homebuyers to take out loans, potentially leading to indirect economic gains.

Concerns over bank profitability

There are concerns that the rate cuts may hurt bank profitability, as lower interest rates could reduce banks' earnings from mortgage lending.

Chinese policymakers are planning to cut interest rates on existing mortgages by around 80 basis points as soon as September 2023.
The proposed cuts will affect more than $5 trillion of outstanding mortgages.
Homebuying loans issued before 2023 generally carry an interest rate over 4%, compared to 3.2% on new mortgages.
Homeowners have been paying down mortgages at a pace of 600 billion yuan per month in the first seven months of 2024.
An 80 basis point cut on existing mortgages could free up 300 billion yuan of interest expenses.

Chinese policymakers are preparing to implement significant cuts to interest rates on existing mortgages, with plans to reduce rates by around 80 basis points as early as September 2023. This decision comes in response to a declining housing market, where home loans have decreased for the first time in two decades, leading to increased repayments from homeowners. The proposed cuts will affect over $5 trillion in outstanding mortgages, with some homeowners potentially receiving immediate reductions of up to 50 basis points. While the cuts aim to stimulate household consumption and restore confidence in the housing market, there are concerns regarding the impact on bank profitability, as lower rates may diminish banks' earnings from mortgage lending. Overall, the effectiveness of these rate cuts may depend on their integration into a broader stimulus package from the government.

Chinese policymakers are set to cut interest rates on existing mortgages by approximately 80 basis points to stimulate the housing market and household consumption. This move will impact over $5 trillion in outstanding mortgages.

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China Plans Mortgage Rate Cuts

9/13/2024

[0]Reuters

9/12/2024

[1]Bloomberg.com

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