China's Massive Mortgage Refinance Scheme Aims to Reduce Borrowing Costs

China is considering allowing homeowners to refinance $5.4 trillion in mortgages to lower borrowing costs. This would include permitting renegotiation with current lenders or refinancing with different banks. The move is part of broader efforts to support the property sector, accounting for a significant part of the economy.

China is on the verge of implementing a sweeping mortgage refinance program, potentially affecting as much as $5.4 trillion in home loans, according to Bloomberg News.

Starting January, homeowners will be able to renegotiate terms with their existing lenders or refinance with a new bank, a first since the global financial crisis. This initiative reflects China's intensified efforts to rejuvenate its crucial property sector, which has historically contributed up to a quarter of the national economy through various measures including reduced mortgage rates and diminished home-buying costs.

Morningstar analyst Jeff Zhang commented that while the measure targets existing homes and is unlikely to bolster new home demand significantly, it effectively prevents early mortgage repayments, potentially diverting saved funds towards increased consumer spending.

(With inputs from agencies.)