Central bank sets the loan prime rate as benchmark for setting the interest rate of newly issued commercial individual housing loans.
In its latest move to regulate the property market’s growth, China has decided to set its interest rates for commercial individual loans. It was an aftermath of People’s Bank of China’s plan to reform the country’s LPR mechanism. The LPR functions as a market-based reference for lenders to state their own loan interest rates.
Beginning October 8, the corresponding term’s LPR will be the basis of the interest rate of newly issued commercial individual housing loans. It with also consider certain additional basis points which should be in line with national and local housing credit policies and unchanged during the housing loan contract term..
It is stated that the housing loan interest rate for first-time buyers should not be lower than the LPR of the corresponding term, while that for second-time buyers should not be lower than the combined level of the LPR and 60 basis points.
The loan interest rate for commercial-purpose housing should not be lower than the combined level of the LPR of the corresponding term and 60 basis points, while interest rate policies for individual housing loans via one’s housing provident fund will stay unchanged.