The Announcement No. 16 [2019] of the People’s Bank of China has played an important role in advancing the market-based interest rate reform and promoting the stable and healthy development of the real estate market since its release. In order to implement the decisions and arrangements of the CPC Central Committee and the State Council, respond to new changes in the supply and demand of the real estate market, meet new expectations of the people for high-quality housing, deepen the market-oriented reform of interest rates, better play the role of market mechanisms, and safeguard the legitimate rights and interests of both borrowers and lenders, relevant matters regarding improving the pricing mechanism for commercial personal housing loans are hereby announced as follows:
1. The borrower, when applying for commercial personal housing loans, can choose fixed or floating interest rate as the pricing methods for the loan contract. If the contract specifies a fixed interest rate, the interest rate shall remain unchanged during the contract period. If the contract specifies a floating interest rate, the interest rate shall be formed by adding spread to the latest Loan Prime Rate (LPR), and the spread, which can be positive or negative, shall reflect factors such as market supply and demand and risk premium of the borrower.
2. The borrower of a fixed-rate commercial personal housing loan, after negotiating with the banking institution, can obtain a new floating-rate commercial personal housing loan to replace the existing one. The interest rate in the replacement is formed by adding spread to the latest LPR, and spread equals the difference between the interest rate of the original contract and the latest LPR.
3. From November 1, 2024 onwards, the borrower of a commercial personal housing loan may negotiate with the banking institution for a different fixing period, if the contract specifies a floating interest rate. On the fixing date, the benchmark for repricing should be reset to the latest LPR. The fixing period and the way for adjustments shall be specified in the loan contract.
4. From November 1, 2024 onwards, the borrower of a floating-rate personal housing loan may negotiate with the banking institution when the interest rate on the loan deviates to a certain extent from that on the newly issued personal housing loans nationwide. The banking institution shall then grant a new floating-rate personal housing loan to replace the existing one based on the negotiation. The newly agreed spread added to LPR shall reflect changes in factors such as the market supply and demand, and the risk premium of the borrower. The new spread shall not be lower than the floor set by the city where the replacement is made, if the floor exists.
5. All provincial branches of the PBOC shall provide guidance to the self-regulatory pricing mechanism for market interest rates at their corresponding levels. The latter shall guide the financial institutions within their jurisdictions to implement the requirements effectively, regulate market competition, and maintain market order, according to the development of the real estate market in the cities within their jurisdictions and regulations of local governments.
6. Banking institutions shall effectively disseminate and explain the policies and provide consultations. They shall safeguard the rights of the borrowers granted by the contract, and protect the legitimate rights and interests of consumers according to laws and regulations, to ensure that relevant work is carried out in a smooth and orderly manner.
This announcement shall come into force on the date of its issuance, while the Announcement No. 16 [2019] of the People’s Bank of China shall be repealed at the same time. Where the previous relevant regulations are inconsistent with this announcement, this announcement shall prevail.
The People’s Bank of China
September 29, 2024
