China cuts benchmark 5-year mortgage rate as part of stimulus package to save property sector.

china central bank

Banca March: China cuts the benchmark 5-year mortgage rate as part of the stimulus package to save the property sector. The LPR rate is designed by 20 commercial banks, which submit the proposal to the central bank every month. There are two horizons: the majority of outstanding loans are linked to the one-year benchmark, while the five-year rate directly affects mortgages. The latter has fallen from 4.2% to 3.95%, considered the biggest cut since the creation of this benchmark in 2019.

For its part, the one-year reference rate has remained unchanged at 3.45%. With house prices recording their worst fall in 9 years in 2023, this measure aims to boost demand in the real estate market. Although the impact on the sector is unclear, the move is seen as overdue: average December mortgages had been granted at 3.97%. Investors look ahead to the National Congress in March, an annual meeting where the government will unveil its 2024 growth target and detail its fiscal policy plan.

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