China cuts mortgage reference rate for first time in nearly 2 years, benchmark lending rate for second straight month
- China’s one-year loan prime rate (LPR) was cut from 3.80 per cent to 3.7 per cent, the People’s Bank of China (PBOC) said on Thursday
- The five-year LPR, which is the reference for mortgages, was also cut from 4.65 per cent to 4.6 per cent
China cut its benchmark lending rate for the second consecutive month on Thursday in the latest move to shore up the cooling economy, while also lowering a mortgage reference rate for the first time in nearly two years.
The five-year LPR – which is a reference rate for mortgages – was also cut from 4.65 per cent to 4.6 per cent for the first time since April 2020, according to the People’s Bank of China (PBOC).
[The] reductions to both the one-year and five-year loan prime rates continue the PBOC’s efforts to push down borrowing costs
“[The] reductions to both the one-year and five-year loan prime rates continue the PBOC’s efforts to push down borrowing costs. We expect additional easing measures to follow in the coming months, but policymakers still appear reluctant to engineer a sharp pickup in credit growth,” said Sheana Yue, China economist at Capital Economics.
The LPR has been considered China’s de facto benchmark funding cost since 2019. The rate is decided by a group of 18 banks and is reported in the form of a spread over the interest rate of the central bank’s medium-term lending facility (MLF).
It had remained unchanged for 20 months until December’s cut from 3.85 per cent to 3.8, having last been adjusted in April 2020 when the one-year LPR was cut from 4.05 per cent.