China lowers benchmark mortgage rate for first time since 2020

Shanghai, China, Jan 20 (EFE).- The People’s Bank of China lowered the reference interest rate to determine the price of mortgages Thursday for the first time since April 2020.

The benchmark credit rate for five years fell from 4.65 percent to 4.6 percent, as reported by the central bank in a statement published on its website.

For its part, the one-year rate, used to set the price of new loans – generally for companies – and those with variable interest that pending repayment, fell from 3.8 percent to 3.7 percent.

This is the second consecutive reduction of this last indicator, since in December the bank had reduced it from 3.85 percent to 3.8 percent after keeping it intact for 20 months.

The rate is calculated from the price contributions of a series of banks – including small lenders that tend to have higher financing costs and greater exposure to non-performing loans – and aims to lower borrowing costs and support the “real economy.”

Sheana Yue, an economist at the consulting firm Capital Economics, said Thursday that the “easing cycle is in full swing.”

“Mortgages will be slightly cheaper now, which should help support housing demand,” the analyst said about the rate’s reduction to five years. “The (central bank) had already urged banks to increase the volume of their loans and mortgages, and selective support policies for real estate buyers appear to be limiting one of the biggest downside risks facing the (Chinese) economy.” EFE

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