Beijing’s Mortgage Rate Subsidy Targets Lower-Income Homebuyers Amid Slowing Growth
China announced a mortgage interest subsidy program for first-time homebuyers purchasing homes under 120 square meters and priced at 1.5 million yuan or less. Eligible buyers will receive subsidies equivalent to one percentage point of their mortgage principal annually for up to five years, according to the Ministry of Finance. The program takes effect October 1 and will run for at least one year. The government also expanded its relending program for technology and infrastructure by 200 billion yuan to a total of 1.4 trillion yuan.
The subsidies target lower-income households, new urban residents, recent graduates, and rank-and-file workers as China’s economy slows below the government’s annual growth target. Third-quarter GDP growth likely fell below 4.3 percent, with home prices declining for more than three consecutive years. Average mortgage rates for first homes in 42 major cities have held at 3.05 percent for 11 months through September, significantly above 10-year government bond yields and rental yields in major cities. Banks have kept the loan prime rate unchanged for 16 straight months through September.
Analysts said the measures are unlikely to reverse the housing downturn. Morgan Stanley’s chief China economist expects full-year GDP growth to remain near the lower end of the 4.5 to 5 percent target range, calling the package modest and insufficient to change household deleveraging behavior. Bloomberg Intelligence described the impact as very limited. The announcement came one day after the State Council pledged to study additional property market stabilization steps, suggesting more intervention may follow.
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