(Bloomberg) -- China’s central bank said the interest rate on new personal mortgage loans will be based on the latest monthly loan prime rate.

The personal mortgage loan rate for a first home must not be lower than the loan prime rate of a corresponding tenor, the People’s Bank of China said in a statement on its website. The rate for a second home must be no less than 60 basis points above the LPR, it said.

The central bank said the new methodology will keep mortgage interest rates “basically stable” with the lowest rate under current system. PBOC’s provincial offices can set the floor of the rate in each region according to the national credit policy and the situation locally.

The changes will be effective Oct. 8, while contracts signed before then will follow the previous agreement, the PBOC said.

To contact Bloomberg News staff for this story: Jing Jin in Shanghai at jjin32@bloomberg.net;Yinan Zhao in Beijing at yzhao300@bloomberg.net

To contact the editors responsible for this story: Shamim Adam at sadam2@bloomberg.net, Stanley James

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