The People’s Bank of China has recently announced a 0.25 percentage point reduction in the interest rate for personal housing provident fund loans. Specifically, the interest rates for first – home personal housing provident fund loans with a term of less than five years (including five years) and more than five years have been adjusted to 2.1% and 2.6%, respectively. This adjustment is expected to significantly benefit homebuyers by reducing their borrowing costs.
Financial Support for Home Purchase
Xia Lei, Chief Economist of Guohai Securities, highlighted that provident fund loans are a crucial form of financial support for home purchase. They serve as a beneficial supplement to commercial loans and offer a distinct interest rate advantage. According to the 2023 annual report data of the National Housing Provident Fund, the interest rate of personal housing loans of the housing provident fund is 0.85 to 1.2 percentage points lower than that of commercial loans in the same period.
Implementation Across Major Cities
Since May 8th, several first – tier cities, including Beijing, Shanghai, Shenzhen, and Guangzhou, have successively lowered the interest rates for housing provident fund loans. Other cities such as Changsha, Xi’an, Ningbo, Nanjing, Kunming, Harbin, Yinchuan, and Henan have also issued notices to implement the new policy of lowering the interest rate of housing provident fund loans. This widespread implementation has led to a positive market response.
Positive Market Response
The reduction in provident fund loan interest rates has been well – received by the market. Page views for some second – hand housing sales clients have increased, and real estate agency store agents have reported a rise in customer inquiries and the willingness to view houses. Some potential homebuyers who were previously undecided have started contacting sales offices to inquire about the savings from the reduced interest rates. The number of residents visiting houses in person has also increased.
Cost Savings for Homebuyers
Zhang Fan, a post – signing consultant at Beijing Lianjia Yaao Contract Service Center, explained that the adjustment in provident fund loan interest rates has led to a decrease in monthly mortgage payments for homebuyers. For example, for a first loan of 1 million yuan with a loan term of 30 years, the minimum repayment amount has decreased from 3,680 yuan per month to 3,528 yuan per month, a reduction of 152 yuan. The total interest expense is reduced by approximately 47,600 yuan. This adjustment applies to both first and second – home provident fund loans, with interest rates reduced by 0.25 percentage points. For existing loans, the interest rates will be automatically adjusted on January 1, 2026.
Support for Rigid Housing Demand
Chen Wenjing, Director of Policy Research at the China Index Academy, believes that the reduction in provident fund loan interest rates is expected to save residents over 20 billion yuan in annual interest expenses. This measure supports the rigid housing demands of resident families and further consolidates the stabilizing trend of the real estate market.
Broader Financing Support
In addition to lowering interest rates on real estate loans, China is accelerating the introduction of a series of financing systems compatible with the new model of real estate development. Li Yunze, Director of the State Financial Regulatory Commission, highlighted that China is steadily promoting the expansion and efficiency improvement of the urban real estate financing coordination mechanism to support the battle to ensure the delivery of houses. The “white list” loans approved by commercial banks have increased to 6.7 trillion yuan, supporting the construction and delivery of over 16 million residential units. This has effectively safeguarded the legitimate rights and interests of homebuyers and provided important support for the stabilization of the real estate market.
Positive Trends in the Real Estate Market
The real estate market continues to show positive changes, as reflected in the credit data. In the first quarter of this year, the balance of real estate loans increased by over 750 billion yuan. New personal housing loans saw the largest single – quarter growth since 2022, and housing rental loans rose by 28% year – on – year.
Future Outlook
Li Yunze emphasized the need to accelerate the improvement of financing systems compatible with the new model of real estate development. This includes loan management measures for real estate development, personal housing, urban renewal, etc. Financial institutions will be guided to maintain the stability of real estate financing, effectively meet the housing demands of first – time homebuyers and those seeking to improve their living conditions, and strengthen the supply of funds for high – quality housing. These measures will help to continuously consolidate the stable situation of the real estate market.
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