Shanghai, China’s financial hub, has lowered downpayment ratios and the mortgage rate floor for first-time homebuyers, marking a significant step among the country’s largest cities to stimulate the struggling housing market.
The city, home to nearly 25 million residents, reduced downpayment ratios by 10 percentage points to a minimum of 20% for first-time buyers. For second-home buyers, the ratio was lowered from 40% to 30%, according to a Monday statement by the central bank’s Shanghai branch.
The floor for mortgage rates was also decreased to 3.5% in Shanghai, down from 3.85%. These new policies will take effect on Tuesday, allowing banks to set their rates based on individual customer conditions, the statement added.
This move by Shanghai follows the central government’s recent announcement of a comprehensive policy package aimed at bolstering the housing market. The measures include easing mortgage rules and encouraging local governments to purchase unsold homes.
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As part of these initiatives, the central bank has pledged 300 billion yuan ($41.4 billion) in low-cost loans to help financial institutions lend to local state-owned enterprises, enabling them to buy unsold apartments and convert them into affordable housing.
In addition to Shanghai’s actions, more than ten provinces have announced reductions in downpayment and mortgage rate requirements. However, other major cities like Beijing, Guangzhou, and Shenzhen have yet to adjust their mortgage rules.