Chinese banks have announced a significant reduction in a key reference lending rate for mortgages, marking the most substantial cut on record and signalling intensified support for the struggling property sector.
According to a Bloomberg report, the five-year Loan Prime Rate (LPR), serving as a crucial benchmark for mortgages, was lowered by 25 basis points to 3.95 percent, as disclosed by the People’s Bank of China.
This move, the first of its kind in eight months, represents the most substantial adjustment since the inception of the rate in 2019, reflecting efforts to stimulate demand in the housing market.
Amidst the backdrop of the world’s second-largest economy grappling with prolonged deflation and the most severe property downturn in history, expectations for intervention to bolster the economy have been escalating.
The recent rate cut comes in the wake of heightened anticipation for additional measures, including adjustments to lending rates, following previous initiatives by the People’s Bank of China.
While the central bank opted against reducing a key policy interest rate, it has undertaken alternative measures to infuse liquidity into the banking system, underscoring its cautious approach to monetary easing.
Analysts had anticipated a rate adjustment, although not to the extent witnessed, with predictions ranging from slight decreases to maintain stability in the market.
The magnitude of the rate cut reflects the urgency felt by policymakers to revitalise the housing sector amid prevailing economic headwinds.
The reduction in the LPR is anticipated to have a cascading effect on mortgage lending rates, potentially incentivising prospective homebuyers and providing a much-needed boost to the real estate market.
Lower borrowing costs are expected to stimulate demand for housing, offering relief to developers grappling with sluggish sales and mounting inventories.
Additionally, the move aligns with broader efforts to stimulate consumption and spur economic recovery, positioning the housing sector as a crucial driver of growth.
(With inputs from Bloomberg)
Source: Thanks WIONews.com