March sees greatest monthly fall in mortgage interest figures since 2019

As a bolstering move to further stabilize the nation's property market, a growing number of Chinese cities have marked down mortgage interest rates for pre-owned homes in March, which is a trend experts expect to expand to more cities in the coming months.

First-time homebuyers in quite a few Chinese cities can apply for home mortgages at an interest rate below 5 percent for existing residential properties, and the lowest rate could reach 4.6 percent, the same as the latest over five-year loan prime rate, the Securities Daily reported on Monday.

Loans for pre-owned homes can be taken out at interest rates below 5 percent for first-time homebuyers in cities including Shanghai, Guangdong province's Shenzhen, Heilongjiang province's Harbin, and Jiangsu province's Suzhou, according to calculations by Securities Daily.

March has witnessed the greatest monthly decline in home mortgage interest rates since 2019, reaching the level seen in the third quarter of 2020, according to the Beike Research Institute, which is part of KE Holdings Inc, a Chinese platform for housing transactions and services.

To be more specific, 82 out of 103 cities Beike Research Institute monitors saw their mainstream interest rates go down. Chengdu in Sichuan province underwent the greatest adjustment by cutting 69 basis points for first homes. Some 20 cities including Shanghai, Shenzhen and Suzhou saw their respective mainstream interest rates for first homes fall below 5 percent.

The interest rate cut is part of the financial system's support in backing rigid demand and home buying requirements for better living, said Chen Sheng, president of the China Real Estate Data Academy.

"Such encouragement in rigid and rational demand is likely to spread to more cities, be they first- and second-tier, or even lower-tier cities," Chen said.

Li Yujia, chief researcher at the provincial residential policy research center of Guangdong, said the home lending interest rate cut will last for some time.

"There is still ample room for the differentiated home mortgage interest rate to apply for in accordance with the latest LPR rate," Li said.

The People's Bank of China announced on March 21 the over-five-year LPR, on which many lenders base their mortgage rates, stood steady at 4.6 percent.

Along with the falling interest rates, loans are being approved more quickly. It takes about one month for applicants to receive their loans in the nation's 103 cities, including 19 cities taking less than 20 days, said Xu Xiaole, chief analyst with Beike.

Thanks to the easier credit environment, average daily transactions for existing homes in the 50 major cities rose about 17 percent between March 1 and March 17 in comparison with the previous month, and supply has improved while home prices stayed stable, Xu said.

Chinese real estate developer Sunac China Holdings Ltd has become one of the latest property enterprises to raise public attention by planning extended payments on a combined 6 billion yuan ($942 million) of onshore bonds last Friday.

The Hong Kong-listed company announced that due to current capital pressures, it was unlikely to redeem two onshore bonds that come due in early April, and it will be in negotiations with bondholders soon.

While actively working out related plans, Sunac China Chairman Sun Hongbin proposed providing an unlimited joint liability guarantee, the announcement said.

Hui Jianqiang, head of research at Beijing Zhongfang-Yanxie Technology Service Ltd, said he holds a neutral to optimistic view on Sunac China.

The situation of Sunac China is different from that of China Evergrande, especially as its chairman is showing more responsibility for its prospects. "If the company successfully went through the current difficulties, there will be a bright outlook ahead for it," said Hui.

The settlement of Sunac China's problem is proof of the wisdom of Chinese regulators, Chen said.

With more diversified solutions in settling the credit risks of Chinese property developers, the real estate market's confidence will get a boost, Li said.