China cut its one-year benchmark lending rate on Monday, as expected, as authorities seek to ramp up efforts to stimulate credit demand, but surprised markets by keeping the five-year rate unchanged. The one-year loan prime rate (LPR) was lowered by 10 basis points to 3.45% from 3.55% previously, while the five-year LPR was left at 4.20%. Most new and outstanding loans in China are based on the one-year LPR, while the five-year rate influences the pricing of mortgages.
SHANGHAI - China cut its one-year benchmark lending rate on Monday, as expected, as authorities seek to ramp up efforts to stimulate credit demand, but surprised markets by keeping the five-year rate unchanged.
The one-year loan prime rate was lowered by 10 basis points to 3.45% from 3.55% previously, while the five-year LPR was left at 4.20%.Most new and outstanding loans in China are based on the one-year LPR, while the five-year rate influences the pricing of mortgages. China cut both LPRs in June to boost the economy.
The medium-term lending facility rate serves as a guide to the LPR and is widely read by markets as a precursor to future changes to the lending benchmarks. But the steady five-year tenor caught many traders and analysts off the guard, with some expecting the troubled property sector and rising default risks at some developers would have led to deeper cuts to the benchmarks.
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