China surprisingly holds mortgage rate, underwhelming move raises easing outlook concerns
- China’s one-year loan prime rate (LPR) was cut from 3.55 to 3.45 per cent, but the five-year LPR remained unchanged at 4.2 per cent
- Analysts have warned that a real impact on housing demand and the economy would require more than just rate cuts
02:09
China surprises market by keeping mortgage rate unchanged amid ongoing property crisis
China refrained from slashing its widely watched mortgage rate on Monday, in an unexpected move that raised market concerns over how the world’s second-largest economy will tackle the ongoing property crisis and also restore homebuyer confidence.
The five-year loan prime rate (LPR) – which is a reference rate for mortgages – was left unchanged at 4.2 per cent at the August fixing, the People’s Bank of China (PBOC) said.
The central bank, though, only cut the one-year loan prime rate – the medium-term lending benchmark for corporate loans – from 3.55 to 3.45 per cent.
China’s stock market fell and the yuan weakened against the US dollar after the surprise move. The yuan deteriorated by as much as 0.4 per cent to 7.3094 per US dollar.
The rate cut of existing mortgage loans is already in the pipeline
The benchmark Shanghai Composite Index fell by as much as 1.2 per cent, while Shenzhen’s key market gauge declined by 1.3 per cent. Hong Kong’s Hang Seng Index, meanwhile, retraced by 1.8 per cent.