China Cuts Key Lending Rate, Adds Mortgage Subsidies to Shore Up Growth
China's central bank cut its PSL rate to 1.5% and widened relending quotas, as the government announced mortgage interest subsidies for eligible first-home buyers from October 1.
China moved on Tuesday to bolster its slowing economy, cutting the rate on a key central-bank lending facility and rolling out interest subsidies on new commercial mortgages for eligible first-time homebuyers.
The measures follow a cabinet commitment to strengthen counter-cyclical policy support amid mounting economic strains.
The People's Bank of China said it would reduce the rate on its pledged supplementary lending (PSL) facility by 25 basis points, bringing the one-year PSL rate to 1.5% from 1.75%. The facility's scope will also be widened to back investment in water, power-grid, computing, communications, urban pipeline and logistics networks.
Alongside the rate cut, the central bank raised several relending quotas. The allowance for its sci-tech innovation and technological upgrading relending facility was increased by 200 billion yuan to 1.4 trillion yuan, while the relending quota for farm and small businesses was lifted by 500 billion yuan to 4.85 trillion yuan. A separate quota for private enterprises was raised by 300 billion yuan to 1.3 trillion yuan.
The central bank said it would keep liquidity ample and steer interest rates to levels that support the real economy.
In a joint announcement with the financial regulator, the government said it would subsidise interest payments on new commercial mortgages for eligible first-home buyers nationwide starting October 1. The annual subsidy will be 1 percentage point for up to five years on qualifying loans, with the subsidised portion capped at 1 million yuan per household, according to a finance ministry statement.
To qualify, homes must have a floor area of no more than 120 square metres and a purchase price of no more than 1.5 million yuan per household.