The People's Bank of China (PBOC) is changing the way mortgage rates are calculated. The benchmark rate for a home loan was replaced by the Lending Prime Rate (LPR) as the central bank seeks to make the mortgage lending system more market-based.

People's Bank of China mortgage rates alteration doesn't mean there's going to be a big change in the cost of a loan. The LPR used to be reserved for top-rated customers in banks, but the PBOC is using the system as the basis of its interest rate reform program. First to make borrowing easier for businesses, and now to bring home loans in line with the market.

The home loan LPR still makes a distinction between home buyers and those seeking an investment property. New mortgages for first home buyers can't be lower than the LPR, while second home buyers' loans must be at least 60 basis points higher. But real estate agents said the bulk of their customers are still on the market for somewhere to live. Yu Sha, a branch manager of Centaline Property, commented that most buyers are replacing their old apartments rather than investing.

The LPR is adjusted by the central bank each month, but whether or not interest repayments vary, depends on the contract with the bank. With the new system, a mortgage taken out in a first-tier city will be slightly more expensive to repay, than one taken out last month. The LPR mortgage rate is 5.23 percent, 0.02 percentage points higher than the old rate.

"The commercial banks will ensure the new interest rate won't differ much from the old rates. We are waiting for policy directions to see whether the mortgage rate could follow the LPR or if the LPR declines in the future. The monetary policy can make some adjustments," said Chen Ji, senior analyst at Bank of Communications.

The central bank said the new policy won't affect the loan contracts made before October 8. Some cities and provinces have their own curbs on housing speculation which also affect mortgage prices. So far, at least 15 provincial-level governments have released required minimum additions to the LPR.