Written by: Leju Finance Wang Min

Just now, the Ministry of Finance issued an important announcement regarding real estate, local debt, key groups, etc. At 10 am on October 12, the State Council Information Office held a press conference, with the head of the Ministry of Finance attending to introduce the relevant situation. Lan Fuan, Minister of Finance, stated at the press conference that the Ministry of Finance will leverage local government tools to support and promote the stabilization of the real estate market. Additionally, Liao Min, Deputy Minister of Finance, announced that the next step will involve actively studying and introducing measures conducive to the stable development of the real estate industry, with three main considerations: Firstly, special bonds will be allowed to be used for land reserves, primarily considering the current abundance of idle and undeveloped land. This will support local governments in using special bonds to reclaim eligible idle land reserves, reducing idle land and enhancing land supply regulation capabilities.

Secondly, the acquisition of existing housing stock will be supported to increase the supply of affordable housing. Given the large number of completed but unsold homes, special bonds will be used to acquire existing commercial housing, and continued use of affordable housing project subsidy funds will be optimized and adjusted to appropriately reduce new construction scale and support local governments in acquiring more through the digestion of existing housing stock. Thirdly, relevant tax policies will be promptly optimized and improved, and efforts are being made to clarify and abolish the VAT policy linking the standards for ordinary and non-ordinary residential properties. On the same day, there was also good news as existing personal mortgage interest rates will be adjusted in batches without the need for application. This morning, various banks, including Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, and China Construction Bank, successively announced that starting from October 25, they will make batch adjustments to existing personal mortgage interest rates.

Except for loans in Beijing, Shanghai, Shenzhen, and other areas that are second-home loans, all other eligible mortgage interest rates will be adjusted to the Loan Prime Rate (LPR) minus 30BP. Simultaneously, multiple banks have clarified that adjustments to existing mortgage interest rates will be made in batches by the banks themselves, without the need for customer applications. According to estimates, this adjustment to existing mortgage interest rates is expected to benefit 50 million households and 150 million people, reducing household interest expenses by approximately 150 billion yuan annually on average. Banks have also stated that this adjustment to existing mortgage interest rates applies only to commercial personal housing loans and does not cover commercial properties, including mixed-use and commercial properties.

Zeng Gang, Director and Chief Expert of the Shanghai Finance and Development Laboratory, stated that the reduction in existing mortgage interest rates has direct and indirect impacts on individuals, the real estate market, and banks. For individuals, the direct impact is a reduction in personal interest burdens, while indirectly, it may increase disposable income and stimulate consumption. For the real estate market, it may directly or indirectly affect the demand for mortgage loans, contributing to the stable operation of the market.

From the bank's perspective, interest rate spreads may narrow further in the short term, but this may not necessarily be a bad thing in the long run. If interest rate reductions can drive an increase in mortgage loan volumes, it can compensate for lower interest rates with increased volume. After all, mortgage loans remain a scarce high-quality asset for banks. Yan Yuejin, Deputy Director of the E-House China R&D Institute, also stated that reducing existing mortgage interest rates is more effective than reducing mortgage interest rates in the new home purchase sector, especially given the recent actions of the Big Four commercial banks, which have a positive effect on boosting market sentiment.