China Mortgage Loan Rates Hit Lowest Since 2009... Real Estate Market Uncertain

Despite a 0.35%P Cut This Year, Calls for Additional Stimulus Persist in China
People's Bank Governor: "Chinese Economy at a Crossroads," Launches Special Loan Support of 39 Trillion Won

[Asia Economy Senior Reporter Cho Young-shin] The lowest mortgage loan interest rate in China has dropped to 4.1% per annum. This is the lowest level since 2009 (4.158%). Although Chinese financial authorities are encouraging borrowing by lowering the 5-year Loan Prime Rate (LPR), which serves as the benchmark interest rate, it is questionable whether the once cooled real estate market will revive. The general consensus is that achieving this year's economic growth target for China is practically out of reach.

Photo by China Fenghuawang Capture

According to the Chinese economic media Caijing, the People's Bank of China reduced the 5-year LPR from 4.45% to 4.30%, a 0.15 percentage point cut, easing the interest and principal repayment burden on borrowers, reported on the 23rd.

The People's Bank of China has cut the 5-year LPR, which directly affects the real estate market, three times this year: from 4.65% to 4.60% in January, from 4.60% to 4.45% in May, and from 4.45% to 4.30% in August, totaling a 0.35 percentage point reduction.

Caijing explained that for a loan of 3 million yuan (approximately 587 million KRW), with a 30-year term and equal principal and interest payments, the monthly interest payment decreases from 15,469 yuan to 14,846 yuan, saving 623 yuan (about 122,000 KRW) per month, and reducing the annual interest burden by 7,476 yuan. They added that 7,476 yuan is equivalent to the price of one Apple iPhone 13 Pro.

The media also noted that in Suzhou, Jiangsu Province, an interest rate of 4.1% is being applied, which is lower than in 2009.

Despite three cuts to the 5-year LPR this year, skepticism about the real estate market outlook remains strong within China.

Mingming, a senior analyst at Zhongxin Securities, said, "Despite the 0.15 percentage point rate cut in May, the real estate market's recovery was limited," adding, "Additional complementary measures beyond further rate cuts are necessary."

Li Chao, chief economist at Zheshang Securities, stated, "The purpose of this rate cut is to resolve real estate issues and optimize the credit structure," and predicted, "If there is no clear change in the real estate market despite this rate cut, financial authorities may further reduce interest rates."

Photo by Xinhua News Agency Capture

Yi Gang, Governor of the People's Bank of China, immediately after announcing the rate cut, summoned heads of major financial institutions such as China Development Bank, Industrial and Commercial Bank of China, Bank of China, and China Construction Bank, urging them to take the lead in economic recovery and credit stabilization.

Governor Yi said, "China is currently at the most difficult crossroads for economic stability, and we must urgently lay the foundation for economic recovery and development," urging, "Increase loans to the real economy and provide reasonable funding for real estate." He particularly emphasized the need for large state-owned financial institutions to adopt a macro perspective and take a leading and autonomous role, directing them to expand total loan volumes.

Meanwhile, Bloomberg reported on the 22nd (local time) that the People's Bank of China will provide a special loan of 200 billion yuan (approximately 39 trillion KRW) to real estate developers. The People's Bank of China is known to support real estate developers with special funds on the condition that under-construction apartments are completed.

This content was produced with the assistance of AI translation services.