Chinese Central Bank Outlines Adjustments to Differentiated Home Loan Policy, Reduces Minimum Home Loan Rate to Below LPR

The People’s Bank of China (PBOC) has issued a new directive adjusting the conditions applied different types of home loans.

PBOC and the China Banking and Insurance Regulatory Commission (CBIRC) jointly issued the “Notice on Several Issues in Relation to Adjustments to Differentiated Home Loan Policies” (关于调整差别化住房信贷政策有关问题的通知) on 15 May.

Key measures of the Notice include:

1. Adjusting the floor for loans to households buying their own ordinary homes for occupation or first home personal loans to no less than the loan prime rate (LPR) for corresponding maturities minus 20 basis points.
2. The floor for second home personal home loan rates will be implemented in accordance with existing provisions.
3. PBOC and CBIRC will guide the disciplinary mechanisms for interest rate pricing at the province level in accordance with the principle of adjustment based on local conditions. Local municipal authorities will be able to independently set the floor for premiums on the interest rates for first and second home personal loans.

PBOC and CBIRC said that the purpose of the new provisions would be to uphold the position that homes are for occupation not speculation, as well as to support improvement to housing polices based on local conditions, and support inelastic housing demand.