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Rate cut boost to Chinese property market

Central bank in dragon country lowers mortgage reference rate from 4.2% to 3.95%; Status quo on loan prime rate at 3.45%

Rate cut boost to Chinese property market

Hong Kong: China’s central bank has cut its key mortgage reference rate by a record amount, as it ramps up efforts to stem a prolonged property crisis, a media report said.

The People’s Bank of China (PBoC) announced on Tuesday that it would cut its five-year loan prime rate (LPR) from 4.2 per cent to 3.95 per cent, while keeping the one-year LPR unchanged at 3.45 per cent, CNN reported.

The 25 basis point cut to the five-year LPR is the biggest reduction the central bank has made since it revamped its LPR system in 2019.

LPR is the rate at which commercial banks lend to their best customers. The five-year rate usually serves as a reference for mortgages.

“Today’s 25 (basis point) cut to the five-year LPR is clearly aimed at supporting the housing market,” analysts from Capital Economics said in a note on Tuesday. “On its own, it will not revive new home sales. But coupled with efforts to provide increased credit support to the developers, today’s cut should help to reduce pressure on the property sector somewhat,” they said.

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