The nation's central bank on Tuesday cut a key benchmark lending rate used to price mortgages, as Beijing seeks to boost growth and counter rate hikes in other major economies.

The five-year loan prime rate (LPR) was lowered from 4.2 to 3.95 percent, the People's Bank of China announced. The one-year LPR, which serves as a benchmark for corporate loans, remained unchanged at 3.45 percent.

The moves are aimed at encouraging commercial banks to grant more credit and at more advantageous rates.

China last trimmed the five-year LPR in June 2023 by 10 basis points.

Market watchers said the rate cut was well expected, but the size of the reduction exceeded their expectations. The central bank-backed Financial News had reported on Sunday that the benchmark LPR could fall in coming days, with the 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 account.

While the new mortgage reference rate comes into effect immediately, existing mortgage holders will not benefit from any reduction in loan repayments until next year, as mortgage rate repricing is on a yearly basis. (AFP/Reuters)
_____________________________
Last updated: 2024-02-20 HKT 10:33