Financial institutions in China, including Agricultural Bank of China, Industrial and Commercial Bank of China, Bank of China, and China Construction Bank, have announced the details of the existing mortgage interest rate adjustment. These announcements clarify the scope, rules, service channels, and timing of the adjustment for existing first-home loans. The adjustments are being made in response to the “Notice on Relevant Matters Reducing Interest Rates on Existing First Home Loans” issued by the People’s Bank of China and the State Administration of Financial Supervision.
Starting from September 25, borrowers with existing commercial personal housing loans for first homes can apply to their lending financial institution to replace their existing loan with a new loan. Borrowers can also negotiate changes to the interest rate agreed upon in the contract. This adjustment aims to reduce the burden on borrowers and improve their consumption and investment capabilities.
According to industry insiders, there are nearly 100 million first-home loan contracts nationwide, with about 40 million borrowers facing negotiation adjustments due to high interest rates. The loans involved in the adjustment may amount to 25 trillion yuan. On average, borrowers can expect a reduction of approximately 0.8 percentage points in their interest rates, significantly reducing their financial burden. For example, a borrower with a 1 million yuan mortgage loan, 25-year term, and an original interest rate of 5.1% can save more than 5,000 yuan in repayment expenses per year if the interest rate is reduced to 4.3%.
The policy has received widespread attention, with borrowers eager to know if their mortgages are eligible for interest rate reductions. The policy applies to two situations: mortgages that meet the first-home standard in the city when the original loan was issued, and commercial personal housing loans for other existing housing stock that meet the first-home standards. Cities like Beijing and Shanghai have recently implemented the policy of “recognizing houses but not repaying loans,” which means that some homes originally considered second homes may now be recognized as first homes, providing borrowers with the opportunity to benefit from the interest rate adjustment.
Financial institutions are preparing to accept adjustment applications from borrowers starting on September 25. The applications will be processed promptly, and banks will strive to maximize convenience for borrowers. The application process does not involve any fees, and borrowers can contact the bank directly for communication and negotiation. It is important to note that borrowers do not need to go through a mortgage agency or spend extra money to find a relationship to facilitate the adjustment process.
Overall, the existing mortgage interest rate adjustment will provide significant benefits to borrowers, reducing their financial burden and improving their consumption ability. This policy is part of the government’s efforts to optimize the assets and liabilities of commercial personal housing loans, ensuring a more balanced and sustainable housing market.