News Update: Beijing, Shanghai, Shenzhen, and Henan have announced the lower limit of the first set of commercial personal housing loan interest rates following a recent announcement made by the two departments. This announcement will have a significant impact on home buyers by allowing them to save money. The People’s Bank of China’s Beijing Branch stated that the lower limit of the interest rate for the first set of commercial personal housing loans in Beijing is the loan market quotation rate (LPR) of the corresponding period + 55 basis points. The lower limit of the country’s first commercial personal housing loan interest rate is the LPR from October 2019 to May 2022 and LPR-20 basis points from May 2022 to present.
Similarly, the Shanghai headquarters of the central bank announced that the lower limit of the interest rate for the first set of commercial personal housing loans in Shanghai is LPR + 35 basis points. The Shenzhen Branch of the People’s Bank of China also announced the historical adjustment of the lower limit of the first-home loan interest rate in Shenzhen, which is set at LPR + 30 basis points. Additionally, the Henan Branch of the People’s Bank of China announced the lower limit of first-home loan interest rates in cities in Henan Province, with different rates for different cities.
According to the policy proposed last night, borrowers of commercial personal housing loans for the first set of housing will be able to apply for new loans to replace the existing ones starting from September 25, 2023. The interest rate for the new loans will be independently negotiated between the financial institution and the borrower, but it cannot be lower than the lower limit of the interest rate policy for commercial personal housing loans for the first house in the city where the original loan was issued. This new loan can only be used to repay the existing first-home loan and will still be included in the management of commercial personal housing loans.
The adjustment of interest rates will benefit two groups of people in particular. The first group is home buyers who previously had high interest rates. For example, Xiao Chen, a new Hangzhou native, had an interest rate of 5.75% for his first house loan. With the new adjustment, his interest rate will drop to 4.2%, resulting in significant savings in monthly payments and total interest.
The second group is the replacement population, who previously had second set interest rates, but now their interest rates will be reduced to the same level as the first set of interest rates. This will greatly reduce their financial burden.
It is important to note that the adjusted interest rate cannot be lower than the lower limit of the first housing loan interest rate policy in the city where the original loan was issued.
This policy adjustment has generated excitement among homeowners who can now save a significant amount of money. It is recommended for those interested to calculate their potential savings based on the adjusted interest rates.