BEIJING (Reuters) -Five of China's major state banks said on Thursday they will start to lower interest rates on existing mortgages for first-home loans, part of a series of support measures announced by Beijing in recent weeks.
Chinese regulators announced the policy last week to help homebuyers amid growing concern over the health of the world's second-largest economy and a series of crises in the nation's property sector.
In separate statements, the mortgage rate move was announced by Industrial and Commercial Bank of China Ltd (ICBC), China Construction Bank (OTC:CICHF) Corp, Agricultural Bank of China (OTC:ACGBF), Bank of China and Bank of Communications.
The interest rates of first-home loans will be reduced to floor levels at the time when a home was purchased, coming into effect on Sept. 25, the banks said.
Chinese brokerage China International Capital Corp Ltd (CICC) said it expected the average reduction for first homebuyers' mortgage rates would be 50 basis points (bps), potentially saving them about 200 billion yuan ($27.31 billion) per year.
CICC estimated that loans to first-time buyers account for about 80%-90% of total outstanding mortgages.
China's home loans totalled 38.6 trillion yuan ($5.3 trillion) at the end of June, representing 17% of banks' total loan books.
Currently, the national floor on first-home loans stands at 20 bps below the benchmark lending rate 5-year Loan Prime Rate(LPR) - currently 4.2%. Some big cities carry higher floor rates.
The banks said they will lower the rates from Sept. 25, adding that clients who had fixed mortgage rates or whose mortgages were classified as second-home loans before the new mortgage easing policy in major cities would need to apply for the rate cuts.
The mortgage rate cuts will put more pressure on banks' margins at a time when the government is expecting them to do more to support the economy. To cushion the impact, banks on Friday cut interest rates on a range of yuan deposits.
It comes amid fears that the property sector, which accounts for roughly a quarter of the economy, could see further turmoil after liquidity stress in leading developer Country Garden became public.
($1 = 7.3226 Chinese yuan renminbi)