China to set lower limits on mortgage rates

China will set lower limits on mortgage rates, the central bank said on Sunday, in an apparent bid to curb housing risks following its reform to switch to a market-based reference rate. The government has clamped down on speculative investment in the housing market since 2016 to prevent a sharp correction as prices soared. There have also been growing concerns that high house prices are pushing up the cost of business and restricting consumer spending. Effective from Oct. 8, banks will set mortgage loans based on the new loan prime rate (LPR) - which has been used as a benchmark for banks to set lending rates, the People's Bank of China said in a statement published on its website. The interest rate on individual mortgage loans for first-time home buyers cannot be lower than the LPR, and the rate on loans for second-time home buyers cannot be lower than the LPR plus 60 basis points, the central bank said. The central bank will guide local authorities to set specific lower limits on mortgage rates to reflect local real estate market conditions, the central bank said.