China cut the market-based benchmark lending rate Friday, the latest move to shore up the economy.
The over-five-year loan prime rate (LPR), on which many lenders base their mortgage rates, fell by 15 basis points to 4.45%, said the National Interbank Funding Center. It represents the largest reduction in this rate since the country revamped the LPR mechanism in 2019.
The one-year LPR stood at 3.7%, unchanged from one month earlier.
The monthly-released data are a pricing reference rate for banks and are based on rates of the central bank’s open market operations, especially the medium-term lending facility rate.
The reduction reflects China’s strengthened efforts to support the real economy, said Wen Bin, chief analyst at China Minsheng Banking Corp.
“This is a key step to anchor market expectations, bolstering market confidence,” Wen said, noting that it will spur financing demand by axing the financing costs for enterprises and funding costs for banks.
The five-year LPR was lowered by a “more than expected” margin, said Zhang Aoping, the dean of the Incremental Research Institute.
The latest rate cut followed a move five days ago to allow commercial banks to reduce the lower limit of interest rates on home loans by 20 basis points for first-home buyers, based on the LPR.
These measures will help the real estate market sustain stable and healthy development and stimulate overall demand, said Zhang.
China’s property industry, a vital sector for economic growth, is taking a hit as recent COVID-19 resurgences and the volatile global situation impacted the economy.
The country’s economy took a hit from the domestic resurgence of COVID-19 cases in April. Authorities have stressed the negative impact will be short-lived.