China seen cutting mortgage reference rate for first time since June
China is widely expected to trim its benchmark mortgage reference rate at a monthly fixing on Tuesday, as banks' improving net interest margins give authorities some leeway to use monetary stimulus to shore up faltering economy growth.
The loan prime rate (LPR) normally charged to banks' best clients is calculated each month after 20 designated commercial banks submit proposed rates to the People's Bank of China (PBOC).
In a survey of 27 market watchers conducted this week, 25, or 92.6%, of all respondents expected a reduction to the five-year LPR on Tuesday. They projected a cut of five to 15 basis points.
Meanwhile, seven, or 25.9%, of all the participants predicted a cut in the one-year tenor.
Most new and outstanding loans in the world's second-largest economy are based on the one-year LPR, which stands at 3.45%. It was lowered twice by a total of 20 basis points in 2023.
The five-year rate influences the pricing of mortgages and is 4.20% now. It was last trimmed in June 2023 by 10 basis points.
The strong expectation of a reduction to the mortgage reference rate comes after the central bank-backed Financial News reported on Sunday that the benchmark LPR could fall in coming days, with five-year tenor more likely to be reduced.
«Lowering five-year LPR will help stabilise confidence, promote investment and consumption, and also help support the stable and healthy development of the real estate market,» the newspaper said on its official WeChat
