China undertakes a record cut in interest rates for mortgage loans

The People’s Bank of China (PBC) has announced a record cut of fifteen basic points in the reference interest rate for mortgage loans over five years, which will drop to 4.45% from 4.6% , with the aim of reactivating the Asian giant’s real estate market.

This is the second drop so far this year in the reference interest rate for mortgage loans, after the People’s Bank of China cut the rate to 4.6% from 4.65% last month of January, after almost two years without variations. In addition, The Chinese central bank has decided to keep the interest rate applied to bank loans maturing in one year unchanged at 3.7%..

“Today’s cut in the five-year prime lending rate should help fuel a revival in home sales, which have gone from bad to worse recently,” said Julian Evans-Pritchard, senior China analyst at Capital Economics. .

The reference rate for mortgage loans for more than five years has been set at 4.45%

However, the expert considers that the lack of a reduction in the prime rate to one year “suggests that the PBC is trying to continue pointing towards relaxation and that a large-scale stimulus as in 2020 should not be expected”.

The decision to cut rates comes after the collapse of loans in April, which saw a monthly reduction of 8.9 billion dollars (60.5 billion yuan) in new mortgages. Home purchases fell 46.6% in April compared to the previous yearafter it already collapsed in March by 26.2% in March, which represents the largest decline since 2006.

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