China's central bank announced its intention to guide commercial banks in adjusting interest rates for existing personal housing loans on a Tuesday work meeting.

Analysts believe that this will alleviate mortgage repayment pressures, stimulate the property sector, and support consumption.

The People's Bank of China (PBOC) also advocated slashing down payment ratios for individual housing loans.

The move is part of the central bank's efforts to implement city-specific and differentiated housing credit policies that cater to residents' housing demand, following China's recent measures in relaxing restrictions on property purchases.

With mortgage rate cuts, prepayment of loans is expected to decrease as the gap between existing and new housing loans narrows, said Bruce Pang, chief economist and head of research at JLL Greater China.

This will also help defuse the risk of deflation, he added.

Commercial banks and mortgage holders may be able to renegotiate their contractual arrangements with lower mortgage rates.

Assuming a cut of 70 basis points on the existing mortgage rate to around 4.0 percent, someone with a 1-million-yuan mortgage loan could see their monthly loan repayment reduce by 7 percent, according to analysts from China International Capital Corporation.

According to analyst estimates, this rate cut could potentially reduce interest costs for the entire industry by around 300 billion yuan ($41.8 billion) per year, equivalent to 0.7 percent of total retail sales of consumer goods in 2022.

The meeting, jointly held by the central bank and the State Administration of Foreign Exchange, also highlighted the need to strengthen and improve foreign exchange policies to ensure the proper functioning of the forex market.

Additionally, the meeting discussed research and development of the digital yuan, simplifying procedures for foreign investors to enter the Chinese market, and diversifying the range of investment assets available.

(Cover via CFP)