Title: China’s Loan Market Quoted Interest Rate Remains Unchanged for Second Consecutive Month
Date: October 20, 2021
In a recent announcement, the central bank of China has authorized the National Interbank Funding Center to release the latest loan market quoted interest rate (LPR). The 1-year LPR stands at 3.45%, while the 5-year and above LPR remains at 4.2%, both unchanged from the previous month. This marks the second consecutive month where LPR has remained steady.
Market analysts have pointed out that the LPR is added on the basis of the medium-term lending facility (MLF) interest rate. If the MLF winning rate remains unchanged, it is expected that LPR will also remain unchanged.
Zhou Maohua, a macro researcher at the Financial Markets Department of Everbright Bank, explained that the stability of the LPR quotation rate in October is due to the overall stability of the policy interest rate. Some banks continue to face pressure on net interest margins, while the recovery of the real economy has been satisfactory. Resident and enterprise confidence is recovering, financing demand is increasing, and the effects of positive macro policies are expected to be further realized. Therefore, the urgency to further reduce financing costs in the short term has diminished.
Since the beginning of this year, the central bank has implemented two cuts in the reserve requirement ratio, resulting in a 0.5 percentage point reduction in the deposit reserve ratio. As a result, the 1-year and 5-year LPR have dropped by 20 basis points and 10 basis points, respectively.
Additionally, the weighted average interest rate of new corporate loans in September was 3.85%, and the weighted average interest rate of existing housing loans at the end of September was 4.29%, both at low levels.
Dong Ximiao, chief researcher of China Merchants Union, believes that maintaining the LPR unchanged will help banks maintain stable interest margins and net profit growth, enhancing their ability to serve the real economy.
Wang Qing, chief macro analyst of Oriental Jincheng, concurs with the expectations of the market stating that the stability of LPR quotations is in line with market expectations. With banks currently facing increased funding costs and reducing existing first-home loan interest rates, there is less motivation for them to lower LPR quotations.
Looking towards the future, there is still potential for downward adjustments in LPR, particularly for the 5-year LPR. Wang Qing notes that even if the MLF operating interest rate remains unchanged, the possibility of a separate downward adjustment in the 5-year LPR quotation is relatively high. This is especially relevant to promote the stability and recovery of the property market.
It is important to note that the Securities Times strives to provide accurate information. The content mentioned in the article serves as a reference and should not be considered as substantive investment advice. Any investment decisions made based on this information are at the individual’s own risk.
To stay updated with the latest stock market trends, policy information, and wealth opportunities, readers are encouraged to download the official APP of “Securities Times” or follow their official WeChat account.
Disclaimer: This article is for informational purposes only. No part of it should be considered as financial advice. Please consult with a professional before making any financial decisions based on the information provided.