Changpeng Wan
– Shanghai’s major banks have introduced significant changes to mortgage lending policies.
– Both new and existing mortgage holders are affected by the adjustments.
– The new rules eliminate the distinction between first and second-home loan rates.
– Homeowners with certain second-home loans may be eligible for reduced interest rates.
– Banks are offering both customer-applied and bank-initiated adjustment processes.
In late August 2025, Shanghai’s real estate and financial sectors were abuzz as multiple banks rolled out revised mortgage lending policies. These changes come in response to broader municipal efforts to stimulate the housing market and provide relief to homeowners. The adjustments mark one of the most significant shifts in Shanghai’s mortgage landscape in recent years, affecting everything from how new loans are priced to how existing borrowers can reduce their interest burdens.
New Policies Reshape Shanghai’s Mortgage Market
On August 25, 2025, the Shanghai Municipal Housing and Urban-Rural Development Management Commission, along with five other government departments, issued the ‘Notice on Optimizing and Adjusting Real Estate Policy Measures in the City.’ This document outlined a series of changes aimed at revitalizing the housing market, including reduced purchasing restrictions, optimized housing provident fund policies, and improved personal housing credit and tax measures. These policies took effect on August 26, 2025, setting the stage for financial institutions to follow with complementary lending adjustments.
By August 29, banks began publishing their implementation details. Nearly two dozen commercial banks operating in Shanghai—including major state-owned institutions like Industrial and Commercial Bank of China (ICBC), Agricultural Bank of China (ABC), Bank of China (BOC), and China Construction Bank (CCB), as well as joint-stock and city commercial banks such as China Merchants Bank, SPD Bank, and Bank of Shanghai—released official notices regarding the optimization of commercial personal housing loan interest rate pricing mechanisms.
Key Changes for New Mortgage Applications
One of the most notable changes is the removal of the distinction between mortgage rates for first homes and second homes. Under the new system, each borrower’s specific interest rate will be determined based on the requirements of the Shanghai Market Interest Rate Pricing Self-Discipline Mechanism, combined with the bank’s operational conditions and the customer’s risk profile.
This means:
– Rates are no longer standardized by property type (first vs. second home)
– Lenders have greater autonomy in setting rates based on risk assessment
– Borrowers may see more personalized loan pricing
Existing Mortgage Adjustments: Who Qualifies and How Much Can Be Saved?
For existing mortgage holders, the new policies continue the approach established in October 2024 regarding the improvement of personal housing loan interest rate pricing mechanisms. Specifically, certain second-home commercial mortgage loans may qualify for routine adjustment of existing mortgage rates.
To be eligible, the mortgage’s spread value must be higher than the national average spread for newly issued mortgages in the previous quarter plus 30 basis points. Qualifying borrowers can apply to adjust their spread, with the new spread being no lower than the national average plus 30 basis points.
Calculating Potential Savings
According to People’s Bank of China data, the weighted average interest rate for newly issued commercial personal housing loans nationwide in the second quarter of 2025 was 3.09%. The latest five-year以上 LPR released on August 20 was 3.5%.
Using the official formula:
National average spread for new mortgages = People’s Bank of China’s latest published national average rate for new mortgages in the previous quarter – arithmetic average of the five-year以上 LPR for each month in that quarter.
This means that a Shanghai homeowner with an existing second-home mortgage rate of 3.45% could potentially apply to reduce their rate to as low as 3.36%, resulting in meaningful savings over the life of the loan.
How to Apply for Mortgage Rate Adjustments
Banks are offering two primary approaches for borrowers seeking to adjust their existing mortgage rates: customer-initiated applications and bank-initiated adjustments.
Most banks, including the large state-owned banks, have indicated that starting September 1, borrowers can contact their loan handling institution or use online and telephone services to check whether they qualify for a rate reduction. Eligible customers can then submit applications to adjust their interest rate spread.
Variations in Bank Approaches
Some banks are taking slightly different approaches:
– Shanghai Bank and Shanghai Rural Commercial Bank will proactively adjust rates on September 5 for eligible customers with floating-rate loans currently priced against LPR
– SPD Bank’s Shanghai branch is implementing both methods: customers can apply in person starting September 1, while the bank will also proactively adjust rates for qualifying clients
– All adjustments are forward-looking and do not apply retroactively
Expert Perspectives on the Mortgage Rate Changes
Yan Yuejin (严跃进), Vice President of the Shanghai E-House Real Estate Research Institute, commented on the significance of these changes: ‘Banks can determine specific rates based on their own operations and customer risk conditions, which gives them certain independent pricing power. This helps banks flexibly adjust strategies according to actual conditions, optimize credit resource allocation, and at the same time more accurately assess risks and improve risk management levels.’
This expert view highlights how the policy changes not only benefit consumers but also provide financial institutions with greater flexibility in managing their mortgage portfolios. The changes represent a maturation of China’s housing finance market, moving toward more risk-based pricing and individualized loan terms.
Broader Implications for Shanghai’s Real Estate Market
These mortgage adjustments come amid broader efforts to stabilize Shanghai’s property market, which has faced challenges in recent years. By making home purchasing more accessible through reduced rates and eliminating the distinction between first and second homes, policymakers appear to be encouraging renewed activity in the housing sector.
The changes may particularly benefit:
– First-time homebuyers who can now access more competitive rates
– Current homeowners looking to upgrade to larger properties
– Investors considering Shanghai real estate
– Families seeking to relocate within the city
Comparing Shanghai to Other Markets
While Shanghai is often a trendsetter in Chinese financial policy, these changes align with broader national efforts to support the real estate sector. Homebuyers and homeowners across China should watch Shanghai’s implementation closely, as successful policies may be adopted in other markets.
Navigating the New Mortgage Landscape
For those considering applying for a new mortgage or seeking to adjust an existing one, the key steps include:
1. Contacting your loan service bank to understand specific eligibility requirements
2. Preparing necessary documentation, including income verification and property details
3. Comparing offers across multiple institutions, as rates may vary
4. Considering both short-term rates and long-term payment structures
5. Consulting with financial advisors if uncertain about the best approach
The recent announcement from multiple Shanghai banks regarding mortgage rate adjustments represents a significant opportunity for both prospective homebuyers and current homeowners. By eliminating the distinction between first and second-home loans and creating pathways for existing borrowers to reduce their interest burdens, these changes could make home ownership more accessible and affordable for many Shanghai residents.
As with any financial decision, individuals should carefully review their specific circumstances, compare options across lenders, and consider both immediate and long-term implications before proceeding. Those who believe they may qualify for rate reductions should proactively contact their banks to begin the application process and potentially secure substantial savings over the life of their loans.
