Mar 14, 2019 02:57 AM

Mortgage Rates Fall in China’s Tier-2 Cities

Report shows mortgage rates falling in second-tier cities. Photo: VCG
Report shows mortgage rates falling in second-tier cities. Photo: VCG

Lower mortgage rates are spreading from China’s top-tier cities to smaller tier-2 cities as housing-market growth slows under pressure from government curbs and economic headwinds.

February mortgage rates fell significantly in cities including Hangzhou, Nanjing, Zhengzhou and Hefei, according to a report Tuesday by online financial service platform The declines started in December, when the national average mortgage rate for first-time homebuyers dropped amid slower growth in housing sales.

A surge in housing prices raised fears of a property bubble in 2016, leading the government to impose administrative curbs on home purchases. But with downward pressure increasing on China’s economic growth, the government has softened its tone on regulating the property market, a pillar of domestic demand. Some cities have already started rolling back some curbs on housing transactions, although regulators said real estate financing policy hasn’t changed.

Liu Chunhang, director of the statistics department at the China Banking and Insurance Regulatory Commission, said banks will continue to provide credit support for buyers who have actual housing needs and the financial ability to purchase. But for buyers with investing or even speculative purposes, the banking regulator will implement stricter controls by increasing down payment requirements and adjusting mortgage rates, Liu said. projected that mortgage rates will fall for homebuyers in more cities.

Mortgage rates for first-time homebuyers are quickly moving toward the five-year benchmark interest rate of 4.9% set by China’s central bank, Li Yujia, a senior researcher at the Shenzhen Real Estate Research Center, wrote in a report. Under the current trend of monetary easing, mortgage rate cuts are expected to spread to cities across the country with hot property markets by mid-2019, Li predicted.

The February rate drop was the first in 23 months, as first-time buyers paid 5.63%, down 0.03 percentage points, or 3 basis points, from January, according to The rate for second-home buyers also declined for four consecutive months to 5.99%.

A total of 44 banks lowered mortgage rates in February, compared with 34 banks in January, the report showed.

Rates in top-tier cities were still the lowest, as fiercer competition forced banks to cut rates in pursuit of market share, a banker told Caixin. Shanghai’s mortgage rates were the lowest in February, and Beijing and Shenzhen were the fourth- and fifth-lowest.

But rates in tier-2 cities showed sharper declines in February. The average mortgage rate for first-time buyers in Nanjing, the capital of China’s eastern Jiangsu province, dropped 20 basis points, the largest decline in the country. Nanning, capital of China’s southern Guangxi region, recorded the second-largest decline in rates for first-time buyers with a drop of 12 basis points.

Mortgage rates in third- and fourth-tier cities remained flat. Deng Haozhi, a Guangzhou-based property analyst, said this is one the reasons property markets in those cities are unlikely to rebound in the short term.

Contact editor Yang Ge (

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