China’s largest cut to key mortgage rate a ‘step in the right direction’ to prop up economy ahead of ‘two sessions’
- Five-year loan prime rate (LPR), which commercial banks use as a benchmark to adjust their mortgage rates, was lowered from 4.2 to 3.95 per cent
- Analysts expect more rate cuts this year, with China having already rolled out various measures to shore up its ailing property sector
China’s largest cut of its key reference rate for mortgage loans could herald more actions to improve market sentiment, shore up the crisis-hit property market and boost the overall economy, analysts said, as policy loosening could be high on the agenda during the “two sessions” next month.
The People’s Bank of China (PBOC) on Tuesday lowered the five-year loan prime rate (LPR), which commercial banks use as a benchmark to adjust their mortgage rates, from 4.2 to 3.95 per cent, marking the largest rollback since the system was introduced in 2019.
Meanwhile, the one-year LPR – an indication of market lending rates – remained unchanged at 3.45 per cent.
The PBOC cut rate was more than the market expected, which may indicate that the policymakers recognise the urgency to take action quickly
“The LPR rate cut is another step in the right direction to address the deflation problem China faces,” said Zhang Zhiwei, president and chief economist at Pinpoint Asset Management, adding that more aggressive fiscal policy easing is needed to boost effectiveness.
