Mortgage Rates Rise in China for the First Time Since 2021

According to new data from research firm Data Motion International Trading Pte, Chinese banks have increased the costs of mortgage loans for the first time in three years. The average mortgage rate for first-time homebuyers in 42 major cities rose to 3.08% in November, up from a record low of 3.05% the previous month, marking the first increase since October 2021. This change is surprising given the ongoing decline in the housing market, which began three years ago and has spread to the economy.

Despite recent signs of improvement in sales following a stimulus push that started at the end of September, property prices are still falling. Chinese banks, struggling with net interest margins at record low levels, are under pressure to increase their balance sheets, which has become a constraint on the central bank's ability to further lower interest rates. The anticipated deeper cuts next year will heighten the challenges that lenders face in managing declining lending rates.