On Sunday the People’s Bank of China announced it’d be instructing banks to lower mortgage rates for existing home loans before October 31.
- The PBOC said banks should reduce interest rates on existing mortgages to no less than 30 basis points (bps) below the Loan Prime Rate (LPR)
The 5-year Loan Prime Rate (LPR) was left unchanged at 3.85% this month. The five-year rate is used as a reference for long-term credit including mortgages. While it was left stable it is expected be lowered. In effect, mortgage rates should drop by circa 50bp. China’s property secotr has been, and continues to be, a huge black-hole drag on the economy. Mortgage rate decution should halp, at the margin.