LONDON, Feb 7 (Reuters) – British house prices were unchanged in January after falling in month-on-month terms in each of the previous four months as borrowing costs rose, mortgage lender Halifax said on Tuesday.
The annual rate of house price growth slowed to 1.9%, the weakest increase in three years, Halifax said.
Britain’s housing market saw a surge in demand from buyers during the coronavirus pandemic but a sharp rise in interest rates over the past year and the squeeze on households’ budgets caused by high inflation has hit the momentum.
Kim Kinnaird, a director at Halifax Mortgages, said the trend of higher borrowing costs hitting demand was likely to continue in 2023.
“For those looking to get on or up the housing ladder, confidence may improve beyond the near term,” she said.
“Lower house prices and the potential for interest rates to peak below the level being anticipated last year should lead to an improvement in home-buying affordability over time.”
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In London, where the housing market has underperformed those of other regions of the country, prices in January were unchanged from the same month last year after rising by nearly 3% in the 12 months to December, Halifax said.
Rival mortgage lender Nationwide said last week its measure of house prices dropped by a bigger-than-expected 0.6% in January and was 3.2% below its peak in August.
As well as the Bank of England’s increases in interest rates since December 2021, there was a major disruption to the mortgage market in late September and October following former prime minister Liz Truss’s “mini budget”.
Mortgages approved in December fell to their lowest since the 2008-09 global financial crisis, excluding the start of the COVID-19 pandemic when there were strict lockdown restrictions, the BoE said last week.
Martin Beck, an economist with forecaster EY Item Club, said January’s flat-lining of prices, as recorded by Halifax, might prove only a temporary pause in a trend of falling prices.
“Although mortgage rates have dipped from post-mini-Budget peaks, they’re still at their highest in a decade,” he said.
Writing by William Schomberg; graphic by Sumanta Sen; editing by Sarah Young and Arun Koyyur
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Feb 1 (Reuters) – Humana Inc (HUM.N) on Wednesday beat Wall Street estimates for quarterly profit as the health insurer’s investment income jumped, even as the company reported higher-than-expected medical costs.
Humana’s fourth-quarter benefit expense ratio, or the percentage of payout on claims compared to its premiums, fell by 1 percentage point to 87.5%, but was higher than analysts’ estimate of 87.20%.
Health insurers’ costs were expected to decline on lower COVID-19-related hospitalizations, though there were concerns around a surge in flu and respiratory syncytial virus cases in the last quarter of 2022.
The respiratory season could be the primary reason behind high-than-expected benefit expense ratio, SVB Securities analyst Whit Mayo said.
Humana forecast adjusted earnings per share (EPS) of at least $28 for 2023, in line with analysts’ expectations, with Chief Executive Officer Bruce Broussard confident of achieving its 2025 adjusted EPS commitment of $37.
The health insurer said it expects to add at least 625,000 members to its Medicare Advantage plan this year.
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Medicare Advantage is the government-supported insurance by private companies for people over 65 years of age and has been growing at a rapid pace, outshining government-provided Medicare plans due to heavy competition among insurers for the same set of customers.
Excluding one-off items, the health insurer reported a profit of $1.62 per share, higher than analysts’ average estimate of $1.46 per share, according to Refinitiv data.
The company’s $160 million investment income was higher than Wall Street estimates of $136.7 million, Oppenheimer analyst Michael Wiederhorn said.
Humana recorded a loss of $71 million, or 12 cents per share, for the quarter due to a one-time charge of $188 million associated with its $1 billion investment plan for its Medicare business announced in February last year.
Reporting by Leroy Leo and Khushi Mandowara in Bengaluru
Editing by Vinay Dwivedi
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LONDON, Feb 1 (Reuters) – British house prices dropped by a bigger-than-expected 0.6% in January and are now 3.2% below their peak in August, following a surge in borrowing costs and broader inflation pressures, mortgage lender Nationwide Building Society said on Wednesday.
January’s decline in house prices was the fourth drop in a row and twice the size expected in a Reuters poll of economists, adding to signs that the market is slowing rapidly.
Interest rates have risen sharply since December 2021 and there was major disruption to the mortgage market in late September and October following former prime minister Liz Truss’s “mini budget”, which set market interest rates soaring.
“It will be hard for the market to regain much momentum in the near term as economic headwinds are set to remain strong, with real earnings likely to fall further and the labour market widely projected to weaken as the economy shrinks,” Nationwide chief economist Robert Gardner said.
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Nationwide forecast in December that house prices would fall 5% in 2023.
House prices in January were 1.1% higher than a year earlier, Nationwide said, the smallest year-on-year increase since June 2020 and down from a 2.8% increase in December. Economists polled by Reuters had expected a rise of 1.9%.
British house prices soared by more than a quarter during the COVID-19 pandemic, boosted by ultra-low interest rates, tax incentives and broader demand for more living space during lockdown, which was seen in other Western countries too.
However, the boom has now gone into reverse, accelerated by disruption to lending since the mini-budget.
The Bank of England reported on Tuesday that the number of mortgages approved in December fell to its lowest since the global financial crisis, excluding the very start of the COVID-19 pandemic when there were strict lockdown restrictions.
Gardner said this fall reflected a drop in mortgage applications after the mini-budget, and that it was too soon to know if the volume of house purchases would recover.
While lenders are now more willing to offer mortgages than just after the mini-budget, the BoE has steadily raised interest rates, and is expected to increase its main rate by half a percentage point to 4% on Thursday, the highest since 2008.
Reporting by David Milliken; Editing by Sarah Young and Sharon Singleton
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WASHINGTON, Jan 31 (Reuters) – U.S. labor costs increased at their slowest pace in a year in the fourth quarter as wage growth slowed, giving the Federal Reserve a boost in its fight against inflation.
There was more encouraging news on inflation, with other data on Tuesday showing house price growth slowing considerably in November. The reports were published as Fed officials began a two-day policy meeting. The U.S. central bank is expected to raise its policy rate by 25 basis points on Wednesday, further scaling back the pace of its interest rate increases.
“The Fed’s rate hikes in 2022 were successful at cooling an overheated economy,” said Bill Adams, chief economist at Comerica Bank in Dallas. “But policymakers want to see a wider margin of slack open up to be confident that the slower inflation in late 2022 becomes the trend.”
The Employment Cost Index, the broadest measure of labor costs, rose 1.0% last quarter, the Labor Department said. That was the smallest advance since the fourth quarter of 2021 and followed a 1.2% gain in the July-September period.
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Economists polled by Reuters had forecast the ECI would rise 1.1%. Labor costs increased 5.1% on a year-on-year basis after climbing 5.0% in the third quarter. They remain higher than the 3.5% that Fed officials and economists view as consistent with tame inflation. The Fed has a 2% inflation target.
The ECI is viewed by policymakers as one of the better measures of labor market slack and a predictor of core inflation because it adjusts for composition and job-quality changes.
The Fed last year raised its policy rate by 425 basis points from a near-zero level to a 4.25%-4.50% range, the highest since late 2007. Though the central bank has shifted to smaller rate increases, it is unlikely to stop tightening monetary policy.
The Fed’s “Beige Book” report this month described the labor market as “persistently tight,” noting that “wage pressures remained elevated across districts” in early January, though five regional “Reserve Banks reported that these pressures had eased somewhat.”
While annual growth in average hourly earnings in the Labor Department’s monthly employment report has cooled, wages remain high. The Atlanta Fed’s wage tracker also moderated, but stayed elevated in the fourth quarter.
Labor market tightness was underscored by a separate Conference Board report showing its consumer survey’s so-called labor market differential, derived from data on respondents’ views on whether jobs are plentiful or hard to get, increased to 36.9 in January from 34.5 in December.
This measure correlates to the unemployment rate from the Labor Department, and the rise was consistent with tight labor market conditions. The government will on Wednesday publish job openings data for December. There were 10.5 million job openings on the last business day of November.
Stocks on Wall Street were trading higher. The dollar slipped against a basket of currencies. U.S. Treasury prices were mixed.
HOUSE PRICES COOLING
“Easing labor cost growth should not be conflated with benign labor cost growth,” said Sarah House, a senior economist at Wells Fargo in Charlotte, North Carolina. “The labor market remains incredibly tight. While the deceleration in labor costs is a welcome development, it is too soon to declare that it will stay there for the long haul.”
Wages and salaries increased 1.0% in the last quarter, also the smallest gain since the fourth quarter of 2021, after rising 1.3% in the third quarter. They were up 5.1% on a year-on-year basis after rising by the same margin in the prior quarter.
Private-sector wages rose 1.0%, slowing from a 1.2% advance in the third quarter. Private industry wages increased 5.1% on a year-on-year basis after rising 5.2% in the July-September quarter.
The moderation in wage growth was more pronounced in the leisure and hospitality sector, where wages and salaries gained 0.9% after increasing 1.8% in the third quarter. Employment in this industry remains below pre-pandemic levels.
But wages in the financial activities industry shot up as did those in wholesale trade. Construction wages rose solidly.
State and local government wages climbed 1.0% last quarter after surging 2.1% in the third quarter.
Higher inflation, however, continued to eat into consumers’ purchasing power. Inflation-adjusted wages for all workers fell 1.2% on a year-on-year basis in the fourth quarter.
Benefits rose 0.8% last quarter after increasing 1.0% in the third quarter. They were up 4.9% on a year-on-year basis.
The Fed’s rate-hiking cycle, the fastest since the 1980s, is dampening house price inflation. The S&P CoreLogic Case-Shiller national home price index, covering all nine U.S. census divisions, increased 9.2% on a year-on-year basis in November, pulling back from October’s 10.7% gain.
House prices measured by the Federal Housing Finance Agency rose 8.2% in the 12 months through November after climbing 9.8% in October. A persistent shortage of homes for sale is, however, likely to prevent a sharp decline in house prices.
“A dearth of inventory, no forced selling and the back-off in mortgage rates are helping to contain the fallout,” said Robert Kavcic, a senior economist at BMO Capital Markets in Toronto.
Despite consumers’ upbeat views of the labor market, they remained gripped by fears of a recession over the next six months, with many adopting a wait-and-see attitude toward big-ticket purchases. The Conference Board’s consumer confidence index fell to 107.1 this month from 109.0 in December.
Consumers’ 12-month inflation expectations rose to 6.8% from 6.6% last month.
“We project that a moderate recession will take hold by mid-year, although the downside for this downturn should be limited by solid financial fundamentals for most households and businesses,” said Ben Ayers, senior economist at Nationwide in Columbus, Ohio.
Reporting by Lucia Mutikani; Editing by Andrew Heavens, Paul Simao and Andrea Ricci
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Jan 25 (Reuters) – Elevance Health Inc (ELV.N) said on Wednesday that the growth in the insurer’s commercial business is expected to keep concerns over attrition in Medicaid membership at bay, even as it forecast a weak 2023 adjusted profit.
Shares of the company rose nearly 5% as investors bet on improving margins and revenues at the commercial segment, through which it sells private insurance plans to employer groups and individuals.
The segment, which reported a profit of $260 million in the quarter, is expected to bounce back this year after its profit halved due to a hit from the pandemic.
Along with an “attractive” membership increase for its commercial plans, Stephens analyst Scott Fidel said margin improvement will also aid the insurer’s earnings in 2023.
This will likely help Elevance counter a hit to its Medicaid membership enrollments from the expected removal of pandemic-related relief measures later this year.
Several members who signed up under the COVID-19 relief measures to the government-aided insurance Medicaid plans will be deemed ineligible, beginning April 1, and will move to private or employer-backed plans.
Elevance, which was previously known as Anthem, expects total medical membership at 2023 end to range from 47.4 million to 48.5 million. Of these, total commercial memberships are expected to be between 32 million and 32.5 million.
“We anticipate growth in individual and group risk-based commercial membership… to be concentrated in the second half as consumers transition from Medicaid to commercial coverage,” Elevance’s finance chief John Gallina said on a conference call.
For the full year, Elevance expects to post more than $32.60 in adjusted profit per share, below estimates of $32.67 per share.
Elevance reported a higher-than-expected profit of $5.23 per share for the fourth quarter.
Reporting by Khushi Mandowara and Bhanvi Satija in Bengaluru; Editing by Shailesh Kuber
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FRANKFURT, Jan 25 (Reuters) – The European Union’s risk watchdog warned on Wednesday that market stress from a potential sharp downturn in the European commercial real estate sector could morph into systemic risk for banks that may lead to higher capital needs.
Supervisors have long warned that the bloc’s real estate market is at a turning point after a lengthy boom and commercial property was especially vulnerable as a cyclical downturn is exacerbated by changes in office use habits after the pandemic.
The European Systemic Risk Board has now issued a fresh recommendation to national and European Union authorities to monitor risks and get lenders to properly assess collateral while setting aside appropriate provisions.
“The sector is currently vulnerable to cyclical risks related to heightened inflation, a tightening of financial conditions limiting the scope for refinancing existing debt and taking new loans, and the pronounced deterioration in the growth outlook,” the ESRB said in a statement.
Climate-related economic policies such as changing building standards, a shift towards e-commerce and increased demand for flexibility in leasable office space, are adding to the pressures, the ESRB, chaired by European Central Bank President Christine Lagarde, said.
The recommendations come after the ESRB already sent a warning in September about rising default risks in he commercial real estate.
The worry is that a sharp downturn in the sector could have a systemic impact on the financial system and the broader economy by limiting banks’ lending capacity.
Lending to the sector is occurring at high loan-to-value ratios, which could rise even further if property valuations rise. This would then lead to higher provision and capital requirements, restricting banks’ ability to lend to others, the ESRB said.
An additional worry is related to liquidity mismatches in open-ended real estate investment funds, the ESRB added.
Funds therefore need to better align redemption terms and the liquidity of underlying assets and must assess risks arising from liquidity mismatch and leverage, it added.
Reporting by Balazs Koranyi; Editing by Emelia Sithole-Matarise
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WASHINGTON, Jan 20 (Reuters) – U.S. existing home sales plunged to a 12-year low in December, but declining mortgage rates raised cautious optimism that the embattled housing market could be close to finding a floor.
The report from the National Association of Realtors on Friday also showed the median house price increasing at the slowest pace since early in the COVID-19 pandemic as sellers in some parts of the country resorted to offering discounts.
The Federal Reserve’s fastest interest rate-hiking cycle since the 1980s has pushed housing into recession.
“Existing home sales are somewhat lagging,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York. “The decline in mortgage rates could help undergird housing activity in the months ahead.”
Existing home sales, which are counted when a contract is closed, fell 1.5% to a seasonally adjusted annual rate of 4.02 million units last month, the lowest level since November 2010. That marked the 11th straight monthly decline in sales, the longest such stretch since 1999.
Sales dropped in the Northeast, South and Midwest. They were unchanged in the West. Economists polled by Reuters had forecast home sales falling to a rate of 3.96 million units. December’s data likely reflected contracts signed some two months earlier.
Home resales, which account for a big chunk of U.S. housing sales, tumbled 34.0% on a year-on-year basis in December. They fell 17.8% to 5.03 million units in 2022, the lowest annual total since 2014 and the sharpest annual decline since 2008.
The continued slump in sales, which meant less in broker commissions, was the latest indication that residential investment probably contracted in the fourth quarter, the seventh straight quarterly decline.
This would be the longest such streak since the collapse of the housing bubble triggered the Great Recession.
While a survey from the National Association of Home Builders this week showed confidence among single-family homebuilders improving in January, morale remained depressed.
Single-family homebuilding rebounded in December, but permits for future construction dropped to more than a 2-1/2- year low, and outside the pandemic plunge, they were the lowest since February 2016.
Stocks on Wall Street were trading higher. The dollar rose against a basket of currencies. U.S. Treasury prices fell.
MORTGAGE RATES RETREATING
The worst of the housing market rout is, however, probably behind. The 30-year fixed mortgage rate retreated to an average 6.15% this week, the lowest level since mid-September, according to data from mortgage finance agency Freddie Mac.
The rate was down from 6.33% in the prior week and has declined from an average of 7.08% early in the fourth quarter, which was the highest since 2002. It, however, remains well above the 3.56% average during the same period last year.
The median existing house price increased 2.3% from a year earlier to $366,900 in December, with NAR Chief Economist Lawrence Yun noting that “markets in roughly half of the country are likely to offer potential buyers discounted prices compared to last year.”
The smallest price gain since May 2020, together with the pullback in mortgage rates, could help to improve affordability down the road, though much would depend on supply. Applications for loans to buy a home have increased so far this year, a sign that there are eager buyers waiting in the wings.
House prices increased 10.2% in 2022, boosted by an acute shortage of homes for sale. Housing inventory totaled 970,000 units last year. While that was an increase from the 880,000 units in 2021, supply was the second lowest on record.
“Home price growth is likely to continue to decelerate and we look for it to turn negative in 2023,” said Nancy Vanden Houten, a U.S. economist at Oxford Economics in New York. “The limited supply of homes for sale will prevent a steep decline.”
In December, there were 970,000 previously owned homes on the market, down 13.4% from November but up 10.2% from a year ago. At December’s sales pace, it would take 2.9 months to exhaust the current inventory of existing homes, up from 1.7 months a year ago. That is considerably lower than the 9.6 months of supply at the start of the 2007-2009 recession.
Though tight inventory remains an obstacle for buyers, the absence of excess supply means the housing market is unlikely to experience the dramatic collapse witnessed during the Great Recession.
A four-to-seven-month supply is viewed as a healthy balance between supply and demand. Properties typically remained on the market for 26 days last month, up from 24 days in November.
Fifty-seven percent of homes sold in December were on the market for less than a month. First-time buyers accounted for 31% of sales, up from 30% a year ago. All-cash sales made up 28% of transactions compared to 23% a year ago. Distressed sales, foreclosures and short sales were only 1% of sales in December.
“While the stabilization of affordability will be good news for potential home buyers, a lack of available inventory could remain a constraint for home buying activity,” said Orphe Divounguy, a senior economist at Zillow.
Reporting by Lucia Mutikani;
Editing by Dan Burns and Andrea Ricci
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COLOMBO, Jan 20 (Reuters) – India has told Sri Lanka it is committed to boosting investment in its debt-ridden neighbour, to help pull it from its worst economic crisis in seven decades, Foreign Minister Subrahmanyam Jaishankar said on Friday during a visit.
The island nation of 22 million has grappled with challenges over the past year ranging from a shortage of foreign currency to runaway inflation and a steep recession, in its worst such crisis since independence from Britain in 1948.
Jaishankar, on a two-day visit, held talks on Thursday with his Sri Lankan counterpart, Ali Sabry, on co-operation in infrastructure, connectivity, energy, industry and health services.
“India will encourage greater investments in the Sri Lankan economy, especially in core areas like energy, tourism and infrastructure,” Jaishankar told reporters in the city of Colombo.
“We count on the government of Sri Lanka to provide a more business friendly environment to create a powerful pull factor.”
On Friday, he is scheduled to meet Sri Lanka’s president and prime minister.
During the visit, the neighbours are also expected to sign a memorandum of understanding for a renewable power project covering three islands in Sri Lanka’s north, two sources at the power and energy ministry said.
Sri Lanka is racing to secure a $2.9-billion bailout from the International Monetary Fund but requires the backing of both China and India, its biggest bilateral lenders, to reach a final agreement with the IMF.
India has told the global lender that it strongly supports Sri Lanka’s debt restructuring plan, with Sri Lanka owing about$1 billion to its nearest neighbour.
“We felt strongly that Sri Lanka’s creditors should take proactive steps to facilitate its recovery,” Jaishankar added.
“India decided not to wait on others but to do what we believe is right. We extended financial assurances to the IMF to clear the way for Sri Lanka to move forward.”
China is Sri Lanka’s largest bilateral lender and the last remaining major creditor to yet to agree to the plan.
Sri Lanka owed Chinese lenders $7.4 billion, or nearly a fifth of its public external debt, by the end of last year, calculations by the China Africa Research Initiative show.
Additional reporting by Devjyot Ghosal in New Delhi, writing by Sudipto Ganguly; Editing by Clarence Fernandez, Robert Birsel
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LONDON, Jan 18 (Reuters) – Empty offices globally should be converted to apartments to address a growing housing crisis in many countries, property executives told the World Economic Forum in Davos on Wednesday.
Commercial real estate values are sliding as an economic downturn reduces demand for space among cost-conscious companies, whose employees have been spending fewer days in the office since the COVID-19 pandemic.
But this could present an opportunity to address shortages of homes, property bosses said.
“Office buildings need to be converted to residential,” said Howard Lutnick, chairman and CEO of New York-based investment firm Cantor Fitzgerald, during a panel discussion. “They will become eyesores and they need to be fixed.”
Offices are emptier than official data suggests as most buildings are still generating income for landlords. However, as these rental contracts expire, cities like New York will have a significant number of obsolete buildings, said Christian Ulbrich, CEO of global property consultancy JLL Inc. (JLL.N).
“So we have to repurpose those buildings in some form or fashion or they will be empty and will be taken down.”
Millions of workers were forced to work from home during lockdowns aimed at stalling the spread of COVID-19 in 2020. Bosses are now struggling to persuade many of those staff to give up the perks of home-working, Ulbrich added.
“You have a middle layer of managers and leaders who enjoy their home in the suburbs and don’t want to have to commute, and that obviously creates the issue of younger folk also not coming back,” he said.
But cities that have lost their Monday-to-Friday buzz could be reinvigorated if public authorities are willing to provide financial support in the conversion of under-utilised offices to homes, since repurposing existing buildings can be very costly, the panellists said.
The cost of making developments sustainable was also proving challenging, the panellists added.
“Low income housing can’t be green, it’s got to be cheap,” Lutnick said. “That is a deep conflict everywhere in the world… It’s very difficult.”
Nathalie Palladitcheff, CEO of Canada-based real estate company Ivanhoé Cambridge, said she was optimistic more buildings could be converted sustainably with investment in technology and materials.
“The best building for the planet is the building that you don’t build,” she said.
Reporting by Iain Withers, Lawrence White and Lananh Nguyen, Editing by Sinead Cruise and Bernadette Baum
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BEIJING, Jan 16 (Reuters) – China’s new home prices fell again in December as COVID-19 outbreaks hurt demand, with Beijing expected to roll out more measures to help sustain the recovery after the dismantling of pandemic curbs last month brightened the outlook.
New home prices dropped both in monthly and annual terms, with continued weak demand a constraint to a steady recovery.
Analysts say the property sector is showing signs of recovery, but it remains uneven and more supportive policies are needed to revive sentiment in the battered market.
The sector will remain sluggish in the short term, and likely to stabilise after the second quarter of the year, said Zhang Dawei, chief analyst at property agency Centaline.
“The market needs more policies targeting improved demand, especially in tier-one cities.”
Prices in December declined 0.2% month-on-month, the fifth straight month of decline and the same pace as in November, according to Reuters calculations based on National Bureau of Statistics (NBS) data released on Monday.
From a year earlier, prices fell for the eighth month in a row, dropping 1.5% from a 1.6% slump in November.
Prices in tier-one cities remained unchanged from a month earlier in December from a decline of 0.2% in November.
Prices in Beijing and Shanghai rose at a slightly faster pace from a month earlier while prices in Shenzhen and Guangzhou fell at a slower pace, official data showed.
In December, 55 out of 70 cities saw a month-on-month decline in new home prices, four more than in November, the NBS said in an accompanying statement.
The property sector, once a key driver of the world’s second-largest economy, was severely mired last year as debt-ridden developers failed to finish stalled projects and led to mortgage boycotts by some buyers.
A flurry of property support measures for home buyers and developers in recent weeks, coupled with Beijing’s abrupt removal of its zero-COVID policy last month cheered the market.
The central bank said earlier this month that for cities where the selling prices of new homes fall for three consecutive months, the floor on mortgage rates can be lowered or abolished for first-time home buyers in phases.
According to analysts’ calculation, 38 cities are eligible for adjustable mortgage rate floors, including some second-tier cities such as Wuhan and Zhengzhou and more than 20 smaller cities.
Chinese mortgage data provider Rong360 estimates the average rate for first time home buyers in 42 major cities in December was 4.16%, down 137 basis points from a year earlier and the lowest since it started the surveys in 2015.
To relax restrictions on borrowing for property developers, regulators will improve the “three red lines” rule for 30 pilot firms, state media Xinhua reported last week. The policy restricts the amount of new borrowing property developers can raise each year by placing caps on their debt ratios.
Reporting by Liangping Gao, Ella Cao and Ryan Woo; Editing by Jacqueline Wong
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