Chinese banks cut mortgage reference rate by most on record

The world’s second-largest economy is in the longest deflation streak since the 1990s [View in browser]( [See all newsletters]( 20 February 2024 Chinese banks cut mortgage reference rate by most on record [Chinese banks]( a key reference lending rate for mortgages by the most on record, ramping up support for the beleaguered property sector. The five-year Loan Prime Rate, a reference for mortgages, was lowered by 25 basis points to 3.95 per cent, according to a statement by the People’s Bank of China on Tuesday. It was the first cut in eight months, and the largest since that rate was introduced in 2019. Nine of the 12 economists polled predicted a reduction, but none by that much. The one-year rate was maintained at 3.45 per cent. Ten of the 19 economists surveyed by Bloomberg forecast a cut between 5 and 15 basis points, while the rest saw no change. The world’s second-largest economy is in the longest deflation streak since the 1990s and the worst property downturn on record. Expectations for more measures — including a cut to lending rates — had been rising in recent weeks after some recent moves by the PBOC. While the central bank refrained from cutting a key policy interest rate on Sunday — a reflection of its moderate approach to monetary easing as it seeks to safeguard the yuan and avoid another debt build-up — policymakers have taken other steps. Also read: [Paytm ready for all options for bank’s survival, including acquisition]( The PBOC unleashed 1 trillion yuan ($139 billion) of liquidity into the banking system earlier this month via a trim to the reserve requirement ratio, and also lowered interest rates on relending funds provided to lenders to incentivize loans to agricultural and small firms. Banks also cut their deposit rates late last year, which helped ease pressure on profit margins. Lower relending and deposit rates will help push the LPR lower, PBOC Governor Pan Gongsheng said during a press briefing last month. It’s the first time since May 2022 that the five-year LPR rate has been lowered without following a reduction to the medium-term lending facility rate. The LPRs are based on the interest rates that 20 banks offer their best customers. They are quoted as a spread over the central bank’s one-year policy rate, or the medium-term lending facility rate. The PBOC, which publishes the LPRs monthly, is seen as having significant sway over them. More stories like this are available on [bloomberg.com]( You Might Also Like [Farmers agitation: Centre proposes five-year guaranteed procurement at MSP for five crops]( [Agri Business]( [Farmers agitation: Centre proposes five-year guaranteed procurement at MSP for five crops]( [Paytm ready for all options for bank’s survival, including acquisition]( [Money & Banking]( [Paytm ready for all options for bank’s survival, including acquisition]( [TVS Mobility hives off dealership biz into a new entity, Mitsubishi picks up 30% in it]( [Companies]( [TVS Mobility hives off dealership biz into a new entity, Mitsubishi picks up 30% in it]( [JSW Steel eyes $1 billion stake in Australian coal mine]( [Companies]( [JSW Steel eyes $1 billion stake in Australian coal mine]( Stay informed Subscribe to businessline to stay up-to-date with in-depth business news from India [arrow]( Copyright @ 2024, THG PUBLISHING PVT LTD. If you are facing any trouble in viewing this newsletter, please try [here]( Manage your newsletter subscription preferences [here]( If you do not wish to receive such emails go [here](