The People’s Bank of China (PboC) cut its five-year loan prime rate (LPR) by 15bps last week to 4.45%, the largest monthly reduction since it became a key benchmark for policymakers in 2019. The move signals a somewhat greater urgency on behalf of the authorities to try to support the extremely weak housing market, as mortgages are linked to the five-year rate; the one-year rate was left unchanged. In the current easing cycle beginning late last year, the five-year rate had previously only been reduced by 5bps. The move follows a recent 20bps cut in the minimum mortgage rate financial institutions could charge first-time buyers, and will add to the various housing-related easing measures implemented by local governments. Nevertheless, housing activity continues to fall sharply and yet another property developer, Sunac China Holdings, has defaulted in the last two weeks. Further significant policy easing measures are likely to be needed to stabilise the sector.
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