In a move to alleviate pressure on China's real estate market, the central bank is nudging financial institutions to reduce interest rates on existing home loans. This initiative is set to take effect by the end of October, aiming to bolster the property sector as the country's economic growth decelerates.

The People’s Bank of China (PBOC) has instructed banks to trim mortgage rates by at least 30 basis points below the Loan Prime Rate, their benchmark for mortgage rates. Initially, this step is expected to decrease rates by an average of 50 basis points. This cut seeks to ease homeowners' burdens and invigorate a property market that has seen diminishing sales and sluggish economics.

Throughout the year, various strategies such as reducing down-payment requirements and offering lower mortgage rates have been employed, but these measures have yet to significantly rejuvenate buyer interest or liquidity. In a parallel effort, certain cities like Guangzhou have announced the relaxation of housing purchase restrictions. Meanwhile, Shanghai and Shenzhen are revising rules for non-local homebuyers and cutting down-payment requirements for first-time buyers.

The backdrop to these changes has been a notable slowdown in the property market, with new home prices experiencing their sharpest decline in nearly a decade. The confluence of declining prices and sales has starkly highlighted the need for reform in the mortgage rate system.

The PBOC emphasizes the urgency of recalibrating the mortgage rate mechanism, in light of the substantial interest from the public in resolving these market dynamics. The country's leading banks are reportedly on board, ready to align with the new policy framework. 

Simultaneously, in response to a wave of early mortgage repayments by homeowners strapped with higher-interest loans, the government is extending supportive measures until 2026. This is aimed at better catering to developers’ financing requirements, further supporting the long-term health of the property sector.

With real estate critical to China's economy, these policy adjustments denote a significant step in addressing both current market challenges and longer-term structural issues. As the nation's economic strategies evolve post-pandemic, the property market remains a pivotal area of focus to rekindle economic vitality.