China announced a shift in its housing policy to allow homeowners to refinance their mortgages.
The Wall Street Journal reported the People’s Bank of China, the nation’s central bank, will allow borrowers to negotiate with lenders to refinance their home loans using the prevailing market rate for new mortgages. The central bank said the refinancing will be available when the deviation with the existing mortgage rate reaches a “certain magnitude,” although it did not offer specifics on when that could happen.
The policy change goes into effect on Nov. 1 and will mark a shift from a housing system where borrowers with existing mortgages were unable to take advantage of interest rate cuts. The central bank also announced a policy change that will enable banks to adjust mortgage rates throughout the year – under current policy, any cuts to benchmark interest rates would result in lower home loans rates only in January of the following year.
“Shortcomings in the current mortgage interest rate pricing mechanism have become apparent, the public reaction has been quite strong and the need to adjust and optimize is urgent,” the central bank said in a statement, which comes at a time when China’s housing market has been burdened with falling new home sales amid high mortgage rates.
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