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China will let some cities cut mortgage rates to support property market

New home prices in the nation’s top 70 cities dropped 0.29pc in August from July and were down 2.1pc from a year earlier

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The Evergrande Plaza in Beijing. The Chinese property firm was the most prominent to default last year. Photograph: Andrea Verdelli/Getty

The Evergrande Plaza in Beijing. The Chinese property firm was the most prominent to default last year. Photograph: Andrea Verdelli/Getty

The Evergrande Plaza in Beijing. The Chinese property firm was the most prominent to default last year. Photograph: Andrea Verdelli/Getty

China will allow some cities to lower the mortgage rate for first-time homebuyers to promote the stable development of the housing market.

Until the end of this year, qualified cities can maintain, lower or cancel the minimum interest rate on a first home mortgage, according to the statement from the central bank and banking regulator late yesterday evening Beijing time.

The new rates can be negotiated between banks and their customers, the statement said.

The new policy will apply to cities where newly constructed housing prices declined during June-August compared to the previous months and also compared to the same period in 2021, according to the statement.

Existing rules for second-home mortgage loans remain unchanged.

New home prices in China’s top 70 cities dropped 0.29pc in August from July and were down 2.1pc from a year earlier.

Downward pressure on home prices was seen across the nation last month, with the trend worst in third-tier cities, where declines accelerated.

The more than year-long slump in the housing market has continued to drag on the economy, adding to the damage to growth and activity from the zero Covid policy.

While the economy looks to have rebounded from the April-June period, when the lockdowns of Shanghai, Jilin province and other major economic hubs almost drove gross domestic product to contract, many economists are lowering their expectations for the full year.

Currently, Chinese banks can cut mortgage rates to a record low of 4.1pc after the five-year loan prime rate was reduced this month to boost housing demand. Earlier on Thursday, China vowed to accelerate usage of targeted loans to ensure delivery of delayed property projects.

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