The People's Bank of China issued a notice on September 29 to improve the pricing mechanism of commercial individual housing loans, allowing existing housing loans that meet certain conditions to renegotiate the markup level, promoting the reduction of existing housing loan rates. The market interest rate pricing self-discipline mechanism was also proposed, and commercial banks should in principle carry out batch adjustments for eligible existing housing loans by October 31, 2024. For existing housing loans with markup levels higher than -30 basis points, they will be uniformly adjusted to not less than -30 basis points, and not lower than the lower limit of the markup for new housing loans currently implemented in the city, aiming to align the interest rates with the national average for new housing loans, with an estimated average reduction of around 0.5 percentage points.

To adapt to the new changes in the supply and demand relationship in the real estate market, during the batch adjustment and normalization stages, there will no longer be a distinction between first and second home loans (except for cities with a policy on the lower limit of mortgage rates that differentiate between first and second homes), guiding the interest rates for first and second home existing loans to decrease to near the national average for new housing loans, reducing the interest burden on existing housing loan borrowers.

So, how much interest expense can homebuyers save?

Taking an example of an existing housing loan of 1 million yuan, a 25-year term, with equal principal and interest repayments, assuming that the mortgage rate decreases from 4.4% to 3.55%, the borrower can save approximately 5,600 yuan in interest expenses per year. After the batch adjustment is completed, it is estimated that this policy will benefit 50 million households and 0.15 billion people, saving existing housing loan families 150 billion yuan in expenses each year.

ICBC, ABC, BOC, CCB, and BOCOM have all issued announcements. The specific details are as follows:

Bank of China announced that they actively respond to the self-discipline mechanism initiative, and are steadily progressing with the work of reducing commercial individual housing loan rates in an orderly and legal manner. The bank will formulate and implement detailed rules in accordance with market principles, comply with laws and regulations, while also making technical preparations. They plan to release specific implementation rules through the bank's official website, official WeChat account, loan processing offices, 95566, and other channels on October 12, 2024, and carry out batch adjustments to existing housing loan rates before October 31, 2024.

The Agricultural Bank of China announced that they will provide convenient services through multiple channels in accordance with market principles and the rule of law, carry out rate adjustment work in compliance with laws and regulations, and will announce specific operational matters on October 12, 2024. They will uniformly implement batch adjustments to the rates of commercial individual housing loans before October 31, 2024. Subsequent relevant information will be announced on the Agricultural Bank of China's official website, WeChat public account, loan processing offices, 95599, and other channels.

China Construction Bank Corporation announced that the bank is urgently formulating a specific plan for adjusting the existing house loan interest rates in batches, planning to release detailed implementation rules on October 12, 2024, and complete the batch adjustment before October 31, 2024. Relevant matters will be promptly announced on the official website, WeChat official account, and branch channels of China Construction Bank.

Industrial and Commercial Bank of China announced that it actively responds to the initiative of self-discipline mechanism and is orderly advancing the adjustment of existing house loan interest rates. The bank will carry out the adjustment of existing house loan interest rates in accordance with market-oriented and legal principles, and plans to announce specific operational guidelines and related matters through the official website, WeChat official account, branches, and hotline 95588 of Industrial and Commercial Bank of China by October 12, 2024, and complete the batch adjustment of existing house loan interest rates before October 31, 2024.

Bank of Communications announced that it plans to release specific operational matters on October 12, 2024, and uniformly implement batch adjustments to the interest rates of existing commercial personal housing loans before October 31, 2024. Subsequent announcements will be made on the official website, WeChat official account, and other channels of the bank.

Shanghai introduces 7 new real estate policies to adjust the purchase restrictions and reduce the down payment ratio.

On the evening of September 29, Shanghai issued a notice entitled 'Notice on Further Optimizing the Policies and Measures of the Local Real Estate Market' (hereinafter referred to as the 'Notice'), including adjustments to housing purchase restrictions, housing crediting policies, and housing tax policies. This notice will be implemented starting from October 1, 2024.

This notice will be effective from October 1, 2024.

This optimization of housing purchase restriction policies includes reducing the years of social security contributions to meet the needs of genuine homebuyers; improving the housing treatment for residents holding residence permits, serving the settlement of talents; implementing the principle of balancing work and residential areas, and increasing the qualifications for homebuying in the Lingang New Area.

Specifically:

(1) For non-local residents and singles purchasing houses outside the outer ring road, the required years of paying social insurance or personal income tax for purchasing a house have been adjusted to continuously pay for at least 1 year before the purchase date.

(2) Non-local residents holding the "Shanghai Residence Permit" with points reaching the standard value and having paid social insurance or personal income tax in this city for 3 years or more can enjoy the same housing purchase benefits as Shanghai residents in terms of the number of houses purchased.

(3) More differentiated housing purchase policies are being implemented in the Lingang New Area of the Free Trade Zone. In addition to the existing housing purchase restrictions, the group working in the new area with a separation of work and residence can purchase an additional housing unit, promoting a work-life balance.

"Shortening the years of social security payment brings two positive effects. First, it reduces the cost of social security payments and the waiting time for housing qualifications, helping to speed up the satisfaction of housing qualifications for non-Shanghai residents in Shanghai, especially those who have recently entered Shanghai for employment, enabling them to obtain housing qualifications faster. Second, it boosts confidence in home buying and activates the potential for home purchases, continuously accelerating the pace of 'working in Shanghai - paying social security - buying a home and settling down.' Shanghai E-House Research Institute believes.

Reducing the down payment ratio, reducing the interest rates on existing housing loans

At the level of optimizing housing credit policies, actively implementing the reduction of interest rates on existing housing loans to reduce interest expenses; lowering the down payment ratio to reduce the threshold for home purchases.

(1) Implementing the national policy of reducing interest rates on existing housing loans, guiding commercial banks to steadily and orderly lower the interest rates on existing housing loans to near the rates of new loans, further reducing the interest expenses of homebuyers. (2) The minimum down payment ratio for commercial personal housing loans for first-home buyers is adjusted to no less than 15%. For the second home, the minimum down payment ratio is adjusted to no less than 25%; implementing differentiated policy regions, the minimum down payment ratio for the second home loans is adjusted to no less than 20%. The minimum down payment ratio for the second home loans with housing provident fund is adjusted accordingly.

Research by the E-House Research Institute found that both types of homebuyers, who subscribe to 5 million yuan and 10 million yuan priced homes, will experience very noticeable effects of reduced down payments and reduced pressure.

According to the notice, the limit for the exemption of value-added tax has been shortened, supporting the demand for housing replacement and improvement; canceling the standard for ordinary housing, guiding the reduction of transaction costs, specifically including:

(1) Adjusting the limit for the exemption of value-added tax, reducing the exemption period for individuals selling residential properties to 2 years.

(2) In accordance with the national work deployment, promptly canceling the standards for ordinary and non-ordinary housing, reducing housing transaction costs, better meeting residents' demand for improved housing.

"This policy further focuses on the demand side, especially the diverse demand for improved housing by residents. Through a comprehensive adjustment in terms of home purchasing qualifications, funding, and costs, multiple departments are taking various measures to optimize housing finance, taxation, and purchase restriction policies, to meet reasonable housing demands and promote comfortable living." Yan Yuejin pointed out.

Guangzhou: Cancelling various purchase restrictions on residential families buying houses

On September 29th, the General Office of the Guangzhou Municipal People's Government released a notice regarding adjustments to measures for the stable and healthy development of the real estate market. The notice specified the cancellation of various purchase restrictions on residential families buying houses in the city, with the notice officially taking effect on September 30, 2024. The following is the original notice:

Notice on Adjusting the Measures for the Stable and Healthy Development of the Real Estate Market in our City issued by the General Office of the People's Government of Guangzhou City

To all district people's governments, various departments of the municipal government, and directly affiliated institutions:

In order to thoroughly implement the decisions and deployments of the Central Committee of the Communist Party of China and the State Council, respond to the concerns of the people, and promote the stable and healthy development of the real estate market, with the approval of the People's Government of Guangzhou City, various restrictions on residents purchasing houses in this city have been lifted.

This notice will be officially implemented starting from September 30, 2024. In cases where existing policies are inconsistent with this notice, this notice will take precedence.

September 29, 2024

General Office of the People's Government of Guangzhou City

On September 29, 2024, the General Office of the People's Government of Guangzhou City issued the "Notice on Adjusting the Measures for the Stable and Healthy Development of the Real Estate Market in our City" (Suifuban 〔2024〕No.65, hereinafter referred to as the "Notice"), the interpretation is as follows:

I. Adjustment of Housing Purchase Restrictions

Previously, according to the "Notice on Optimizing the Stable and Healthy Development Policies of the Real Estate Market in Guangzhou by the General Office of the People's Government of the City" (Letter from the Guangzhou Municipal Office [2023] No. 49), the "Notice on Further Optimizing the Stable and Healthy Development Policy Measures of the Real Estate Market in Guangzhou by the General Office of the People's Government of the City" (Letter from the Guangzhou Municipal Office [2024] No. 6), and the "Notice on Further Promoting the Stable and Healthy Development of the Real Estate Market in Guangzhou by the General Office of the People's Government of the City" (Letter from the Guangzhou Municipal Office [2024] No. 38), Yuexiu, Haizhu, Liwan, Tianhe, Baiyun (excluding Jianggao Town, Taihe Town, Renhe Town, and Zhongluotan Town), Nansha and other areas are restricted housing purchase areas. Purchasing residential properties over 120 square meters (excluding 120 square meters) is not restricted in these areas. Non-local registered residents and singles who can provide proof of personal income tax payment or social insurance payment continuously for the six months prior to the purchase date in the restricted areas are limited to buying 2 and 1 residential properties (with a building area of 120 square meters or less), respectively.

After the adjustment of this purchase restriction policy, both local and non-local residents as well as singles in this city will no longer be subject to qualification review or restrictions on the number of properties purchased within the entire city.

2. Execution Timing

The policy adjustment will be implemented starting from 00:00 on September 30, 2024. If there is any inconsistency between the original policy and the "Notice," the "Notice" shall prevail.

This article is reproduced from the "Daily Economic News" official account. Edited by Smart Financial News: Jiang Yuanhua.