Guangzhou, which has a population of around 15 million, was the first metropolis to announce this week that it would relax the rules for issuing mortgages. Homebuyers can now enjoy preferential loans regardless of their credit rating, the city government said. Beijing, Shanghai and Shenzhen could follow suit, as could a dozen smaller major cities.
The People’s Republic also wants to use other measures to support the faltering real estate sector and thus boost the economy. Several state banks would want to cut interest rates on existing mortgages, people familiar with the matter told Reuters. That would be the first cut since the 2008/09 financial crisis. Beijing hopes to boost consumer demand for real estate. The industry has been a key driver of economic growth for years, but it is now being held back by weak home sales and defaulting contractors. China’s mortgage loans totaled the equivalent of five trillion euros at the end of June. That is around 17 percent of the banks’ total loan portfolio.