GUANGZHOU yesterday became the first major Chinese city to announce an easing of mortgage curbs as the government ramps up efforts to revive the property sector and shore up the economy. The decision comes as some domestic banks are expected to lower interest rates on existing mortgages, three sources familiar with the matter said Tuesday, in the first such cut since the global financial crisis. The government hopes the reduction in mortgage payments will help revive consumer demand for the property sector, which has led economic growth for several years and is now dragging it down amid slowing home sales. China’s mortgage loans reached 38.6 trillion yuan (US$5.29 trillion) at the end of June, representing 17% of banks’ total loan books. In a notice, the Guangzhou city government said mortgage curbs would be eased, allowing homebuyers to enjoy preferential loans for first-home purchases regardless of their previous credit record. The rest of China’s top four first-tier cities — Beijing, Shanghai and Shenzhen — are expected to follow suit. Some smaller cities have already taken steps to make it easier to buy homes. The property sector accounts for roughly a quarter of China’s economy and the government has announced a series of measures to support the housing market in recent weeks. The reduction in existing mortgage rates is one of several support measures announced over the past few weeks. Property agents said there were few people shopping in the secondary market, and commercial mortgage rates are still much higher than the rates offered by the housing provident fund, a savings program by governments for housing purchases. Jackson Wang said he is going to move his mortgage with a top domestic bank to the provident housing fund, which would lower his interest rate to 3.2% from the current 4.8%. He pays more than 5,000 yuan per month for a flat in the eastern city of Linyi. “I have already bought a home at a high price and been paying a high mortgage, so I’m hoping for a rate cut,” Wang, 38, said. The mortgage rate cuts will add to margin pressure on banks. Three major banks said in interim financial reports their net interest margin (NIM), a key gauge of profitability, shrank in the second quarter. Vivian Xue, director of APAC Financial Institution at Fitch Ratings, said revenue pressure on the banking sector was expected to persist in the second half of this year and into 2024, due to narrowing NIM and tepid retail loan demand. To soften the effect, major domestic banks will lower interest rates on some fixed-term deposits, and the quantum of cuts would range from 10 basis points to 25 basis points. (SD-Agencies) | 