(Yicai) Sept. 12 -- Guangzhou is likely to become the first of China’s first-tier cities to lower the minimum interest rate on mortgages offered to first-time home buyers to below the central bank’s benchmark loan prime rate, Yicai learned from property market insiders.

The city is going to allow local banks to set the rate floor on first-time mortgages at 10 basis points under the LPR, compared with parity with the LPR previously, the people said. For buyers who already own a home, the new floor will be ‘LPR + 30 bips,’ down from ‘LPR + 60 bips,’ and their minimum down payment will fall to 40 percent from 70 percent of the unit price, they said.

“These new adjustments have been basically finalized, though no official announcements have been made,” a source told Yicai. Another source close to the regulator confirmed it.

With lower minimums afoot, bankers approached by Yicai said the current mortgage lending quotas are quite sufficient for the moment.

Guangzhou’s residential property market has perked up after the southern Chinese city eased its mortgage policy at the end of last month, though prices have not budged, according to local real estate agents.

“Eleven homes have already been sold in one of the residential communities I work on so far this month, while only four to five apartments were sold on average in the previous months,” an agent told Yicai.

Most of this month’s deals, mainly for flats with smaller floor areas, had lower price tags, while many sellers have set their hearts on moving to better homes, the person noted, adding that transaction prices have remained stable on the whole.

Sellers are coming forward. The number of pre-owned homes up for sale in Guangzhou, the capital of Guangdong province, has risen by 4,000 compared with early June to a record 137,800, according to statistics from real estate agency Lianjia.

But it remains to be seen whether the latest mortgage policy adjustments can reverse the market’s slide, Li Yujia, chief researcher at Guangdong Housing Policy Research Center, told Yicai.

He noted that demand pent up during the pandemic was released in the first quarter, but once the initial surge was over the market started to cool in the second quarter. The boost to the market from the eased policy is also likely limited, and the market will likely weaken from the end of this year or even November, Li added.

“Whether the property market can really stabilize still depends on a recovery in supply-and-demand fundamentals,” Li noted.

Editors: Tang Shihua, Futura Costaglione