China has announced a greater-than-expected cut in its over-five-year loan prime rate (LPR)—a key benchmark for mortgage rates—reducing it by 25 basis points to 3.95 percent on Monday. This marks the first reduction after seven consecutive months of holding steady.
The one-year LPR remained unchanged at 3.45 percent, according to an announcement by the People’s Bank of China. This adjustment is expected to lower the national mortgage rate to 3.75 percent, reducing interest payments for both new and existing borrowers.
Analysts believe this move will help reduce borrowing costs, stimulate investment and consumption, and support the healthy development of the real estate market. Bruce Pang, chief economist at JLL Greater China, stated that the policy aims to steadily cut financing costs, stabilize the exchange rate of the yuan, and balance economic recovery with the prevention of idle funds.
Analysts Wen Bin and Zhang Liyun from the China Minsheng Bank noted that the cut is set to boost demand, stabilize the real estate sector, and prevent a surge in early mortgage repayments. They view it as a positive signal for market confidence and a step toward a “soft landing” for the real estate industry.
Lowering the LPRs is also expected to release more positive monetary policy signals to boost market confidence, according to the analysts.
Reference(s):
China announces greater-than-expected key mortgage rates cut in Feb.
cgtn.com
