Ahmedabad: China is preparing to reduce interest rates on more than 5 trillion won of outstanding loans in September itself. Bloomberg has said in a report that the government intends to support millions of families by reducing borrowing costs to increase consumption in the country.

There is currently a lack of confidence in the world’s second-largest economy. In China, new first home loans currently charge 3.2 percent interest, while new second loans charge 3.5 percent, while homeowners are currently paying up to 4 percent on older loans.

Some banks are making final preparations to prepare for the next adjustment on interest rates. Some categories of homeowners may also benefit from a 50 basis point cut. Usually interest rate changes in China are made by lenders in the month of January. In the new negotiations, existing lenders may get a benefit of about 80 basis points in two stages.

China’s outstanding housing loan principal amount at the end of June was at a three-year low of 37.79 trillion yuan, or about Rs 450 lakh crore.

Further cuts in interest rates will put pressure on banks as their margins hit a record low of 1.4 percent at the end of June and are well below the 1.8 percent threshold needed to maintain reasonable profitability. The government’s potential new decree will save landlords more than 300 billion yuan in annual interest costs. Monthly payments from a 30-year 10 million yuan loan will be reduced by about 9 percent.

Rahul Dev

Cricket Jounralist at Newsdesk

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