(Yicai) Oct. 25 -- Major banks in China began trimming existing mortgage interest rates by 30 basis points below the benchmark loan prime rate today, in a move that is expected to benefit around 50 million households. Experts say this will have a positive impact on the macroeconomy.

Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, and China Construction Bank have automatically implemented the cuts, first announced on Oct. 11, meaning the home owners do not need to apply for them. Some small and medium-sized banks are also following suit. Overall, the adjustments are expected to be completed by Oct. 31.

Mortgage interest rates for eligible existing loans are being trimmed by 0.5 percentage points. This adjustment is expected to save borrowers CNY150 billion (USD21 billion) in interest repayments and benefit 50 million households or 150 million people.

A person living in Beijing, for example, who has taken out a CNY1 million (USD140,000) mortgage with a 25-year pay-back period for both principal and interest, will see his or her mortgage rate drop to 3.55 percent from 4.4 percent. This equates to a monthly saving of CNY469 (USD65), which comes to over CNY140,000 (USD19,644) in total savings.

Lowering existing mortgage rates not only reduces the burden on homebuyers, but also decreases the incidence of early repayments, experts said. This will help boost market confidence and is expected to have a series of positive effects on the macroeconomy.

Reducing payment pressure will increase borrowers’ disposable income, allowing them to spend on a wider range of consumer goods, experts said. For young families and individual-run businesses, this improves cash flow and boosts consumer confidence.

This round of mortgage rate cuts will help stabilize the real estate market and halt its decline, they said. Reducing existing mortgage rates alleviates homebuyers' concerns about widening mortgage rate differentials, helps release rigid housing demand, and supports the stable and healthy development of the property market.

Recently, the number of viewings and transactions for new and second-hand homes in first-tier cities such as Beijing has increased significantly. Early mortgage repayments since October have slumped 20 percent compared to September before the policy was introduced, according to data from a major bank.

Market analysts believe that the recent roll out of real estate support policies has boosted demand for home purchases. Coupled with local governments actively implementing city-specific measures, the sluggish real estate market is starting to show signs of recovery.

Editor: Kim Taylor