China’s four biggest banks lowered their mortgage rates in Guangzhou city by 20 basis points on Monday, two people familiar with the matter said – a fresh move aimed at supporting a property sector reeling from a severe cash crunch.
The southern city of Guangzhou, the capital of Guangdong province, is home to the country’s most indebted property developer China Evergrande Group.
The move follows decisions by some banks to require smaller downpayments in some cities last week. Media have also reported this month that developers will also gain easier access to presale proceeds from residential projects.
Cutting mortgage rates for first-time home buyers to 80 basis points over the country’s benchmark loan prime rate (LPR) from 100 basis points were the Guangzhou branches of the Bank of China, the Industrial and Commercial Bank of China, China Construction Bank and Agricultural Bank of China, the two people said.
For those buying their second homes, the rate was also lowered by 20 basis points to 100 basis points over the LPR, said the people, declining to be identified due to the sensitivity of the matter.
The one-year LPR, a market-based benchmark lending rate, was at 3.7% while the five-year rate stands at 4.6%.
Regulatory curbs on borrowing drove China’s property sector into a liquidity crisis last year. The contagion has engulfed a swathe of developers and contributed to a sharp slump in China’s property market, which accounts for a quarter of its economy.
Several banks in the eastern city of Suzhou, in Jiangsu province, have also lowered their mortgage rates for first-time homebuyers to as low as 4.8%, Chinese media outlet Cailianshe reported on Monday.
• Reuters with additional editing by Jim Pollard
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