5-year LPR also maintained at 4.20% for 4 consecutive months
On the 20th, the People’s Bank of China froze the one-year LPR loan prime rate, which serves as the standard for lending rates for financial institutions, at 3.45% for two consecutive months.
According to Xinhua Network and Groom Finance, the People’s Bank of China announced on this day that the 5-year LPR, which is the standard for housing loan interest rates, will remain at 4.20% for the fourth month.
Last August, the 1-year LPR was cut by 0.1 percentage points and the 5-year LPR was maintained, and the LPR was frozen again in the decision to observe the effects of stimulus measures, including financial easing and real estate support measures.
The media analyzed that the People’s Bank of China decided not to change the LPR for now, considering that a series of key indicators recently supported signs of economic recovery and that additional financial easing is limited due to the weakness of the yuan.
The market generally expected that both 1-year and 5-year LPRs would be frozen.
The Chinese economy has hit bottom and is recovering. As inventory adjustments progress, production is showing signs of recovery again.
Gross domestic product (GDP) in the third quarter from July to September increased by 1.3% compared to the previous quarter, seasonally adjusted. It increased from 0.5% in the second quarter from April to June. It grew by 4.9% compared to the same period last year.
The one-year LPR is a guideline for the lending interest rate that banks apply to high-quality companies. In the case of 5-year LPR, it is the standard for home mortgage loan interest rates.
The People’s Bank of China announces the LPR on the 20th of every month.
In August, the People’s Bank of China lowered the one-year LPR by 0.10% from the previous 3.55% in two months since June. Interest rates were lowered this way to stimulate sluggish demand for funds amid the economic slowdown.
The real estate market, which has driven the Chinese economy, is experiencing a prolonged recession. There is an increasing number of major cities where apartment prices have fallen due to sluggish sales.
People’s Bank of Korea and others have proposed easing regulations, such as lowering the down payment rate paid when purchasing a home.
In addition, the People’s Bank of China lowered the reserve ratio, which represents the ratio of deposits compulsorily deposited by commercial banks, by 0.25 percentage points, thereby increasing funds circulating in the market.
Previously, the People’s Bank of China announced on the 16th that it would freeze the LPR by leaving the medium-term liquidity support window (MLF) 1-year interest rate, which is the basis for calculating the 1-year LPR, at 2.50%.
Source: Donga
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