BEIJING, China: As part of Beijing's efforts to revive the debt crisis affecting the property sector and boost the struggling economy, some Chinese state-owned banks are reported to be planning to cut interest rates on existing mortgages.
If implemented, the cuts will be the first such move in China since the global financial crisis. Also, different types of clients and those in different cities will have varied mortgage rate reductions, which could be as much as 20 basis points in some cases.
Over the past few weeks, Beijing has announced several other property, economic and market support measures, in response to concerns about the health of the world's second-largest economy.
Accounting for some one-quarter of China's economy, the property sector has witnessed several crises since 2021, and this month declining liquidity in leading developer Country Garden became public, deepening contagion fears.
After the central bank said that it would guide commercial banks to reduce interest rates, Chinese lenders were expected to reduce mortgage rates.
After a series of early repayments of mortgage debt, the central bank proposed cutting rates to reduce interest rate costs for homebuyers and to encourage consumption in a slowing economy.
Since 2022, China has been cutting new mortgage rates to boost sales in its property market, but this has instead encouraged households to pay off existing mortgages early, squeezing the profits of banks.
Chinese banks have also been battling lower lending rates and pressure from the government to prop up the economy, as well as bad debt related to property developers and local government financing vehicles.
At the end of June, China's mortgage loans totaled 38.6 trillion yuan ($5.29 trillion), representing 17 percent of banks' total loan books.