(Yicai) Oct. 11 — Bank of China, Industrial and Commercial Bank of China and other Chinese commercial lenders will trim the interest rates on existing mortgages by 30 basis points below the benchmark loan prime rate to ease the burden on borrowers.
The adjustments involve first and second-time apartment purchases and are applicable to most individual mortgages that were taken out before the recent round of mortgage rate cuts, the banks said.
However, the adjustments are not applicable to mortgages on second-time apartment purchases in Beijing, Shanghai and Shenzhen. Nor do they apply to loans for commercial-use apartments, housing provident fund loans, and housing provident fund loans combined with housing loans, they added.
The rates will be adjusted automatically for eligible mortgages and borrowers do not need to supply any additional documents. But those who took out fixed or benchmark rate-priced mortgages will have to apply to turn their mortgages into floating rate-priced ones.
The ICBC will make the adjustments on Oct. 25, and the other banks will do so by Oct. 31, they said.
The move will trim the mortgage rate on existing mortgages to 3.55 percent, lower than the average rate of mortgages newly issued in the first eight months which was 3.61 percent, according to PBOC data. The current average rate of outstanding mortgages was 4.06 percent as of July 31.
This will result in savings of CNY170 (USD24) a month for a person who has taken out a CNY1 million (USD141,492) mortgage at a rate of 3.85 percent with a 30 year pay back period, should the rate be adjusted to 3.55 percent, according to ICBC calculations. This comes to a total savings of CNY61,200 (USD8,660).
The adjustments are not retroactive, meaning the banks will not refund borrowers the difference between the interest they already paid at a higher rate and the new rate.
Editors: Zhang Yushuo, Kim Taylor
