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PBOC Cuts Five-Year Loan Primate Rate by Record Pace Since 2019

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Headquarters of the People's Bank of China (PBOC) in Beijing, China, May 21, 2021

China’s Central Bank reduced a key interest rate for long-term loans at a record pace, a move that would cut mortgage costs and might help counter weak loan demand.

Source: PBOC

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The five-year loan prime rate, a reference for home mortgages, has been cut to 4.45% from 4.6%. That was the biggest decline since the recovery of the rate in 2019.

The rate cut is a major move to bolster loan demand as consumer and business confidence has been slowed down by Covid lockdowns and a downturn in the property market.

The move is the latest action to bolster the struggling housing market and comes after the PBOC lowered the floor on the rate for new mortgages to 20 basis points below the five-year LPR.

The one-year loan prime rate, the de facto benchmark lending rate, was maintained unchanged at 3.7%.

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