Individual mortgage rates have dropped to the "2% range"? Recently, some borrowers discovered their existing mortgage rates have fallen below 3%, sparking significant market attention. Discussions now focus on whether mortgage rates will decline further and how the real estate market's supply and demand will shift, with opinions varying widely.
In reality, mortgage rates falling below 3% are not a nationwide phenomenon. On one hand, the "2% range" rates are more common in existing individual housing loans rather than new loans. The main reason is that some borrowers previously agreed with banks on mortgage repricing terms with a larger reduction from the Loan Prime Rate (LPR). As the 5-year and above LPR has consistently declined in recent years, their existing mortgage rates have also fallen, dropping below 3% recently.
On the other hand, interest rates for new housing loans generally remain above 3%, with only a few foreign commercial banks in certain cities offering rates below 3% for mortgages, but borrowers must meet high personal credit conditions. Currently, China's mortgage rates have been marketized, with no national policy floor for first-home or second-home loan rates. Commercial banks can independently determine rates based on borrowers' risk profiles.
Additionally, China's real estate market has obvious regional characteristics, with varying economic development levels, industrial structures, and population compositions across different areas. Supply and demand for housing also differ, making it normal for mortgage rates to vary by city. Therefore, the recent emergence of "2% range" mortgage rates is a market behavior by individual commercial banks in certain regions under the marketized mortgage rate framework, and should not be overinterpreted.
Currently, China's mortgage rates remain stable. The latest data from the People's Bank of China shows that in June this year, the average interest rate on new individual housing loans was about 3.1%, roughly flat year-on-year. The reason some banks are focusing on a few creditworthy borrowers to offer "2% range" low-rate mortgages is, from a management perspective, primarily to exchange price for volume, capture market share, and stabilize asset-side scale.
From a long-term perspective, mortgage rate trends are influenced by multiple factors, including changes in the 5-year and above LPR and shifts in the real estate market's supply and demand. On one hand, most mortgage rates are currently linked to the 5-year and above LPR; if the latter changes, mortgage rates will follow. On the other hand, driven by a series of policy measures, China's real estate market has shown positive changes in the first half of this year. For instance, commodity housing sales prices in first-tier cities have risen month-on-month for four consecutive months; the unsold floor area of commercial housing nationwide has declined for four consecutive months, with a year-on-year decrease of 0.9% as of the end of June, a 0.5 percentage point expansion from the previous month; second-hand housing transactions have been relatively active, with online signed area growing 10.2% year-on-year in the first half of the year, accelerating by 2.5 percentage points from the January to May period; market expectations have also improved.
Currently, as a key component of the real estate market's credit supply, the price of individual housing loan funds remains at a low level. This year, some regions have implemented interest subsidies on mortgages to reduce homebuyers' financial burdens. For example, subsidies are offered to buyers who complete "sell old, buy new" transactions within a certain timeframe, and to young talent who use provident funds and commercial loans for first-home purchases of new commodity housing. Going forward, as the real estate market's supply-demand relationship gradually improves and market expectations rebound, various regions will continue to follow the principle of city-specific policies, controlling new supply, reducing inventory, optimizing supply, and promoting the stable and healthy development of the real estate market.