Year-ender: Major financial news of China
PBOC releases new loan prime rate
The country's central bank announced on Aug 25 that starting from Oct 8, new mortgages will be priced based on the latest month's loan prime rate, or LPR of the corresponding term, while certain basis points will be added.
New mortgage rates for first-home purchases should not be lower than the related LPRs, while those for second-time buyers should be at least 60 basis points higher than the LPRs, according to the People's Bank of China.
This came after the central bank announced a plan to reform the LPR mechanism to better reflect market changes.
Under the revamped mechanism, the LPRs, released on the 20th day of every month, are based on rates of the central bank's open market operations, especially medium-term lending facility rates. Banks are required to set rates for new loans using the new LPRs as the benchmark.
The one-year LPR came in at 4.15 percent on Nov 20, down from 4.2 percent a month earlier. The rate for above-five-year fixing stood at 4.8 percent, down from 4.85 percent a month earlier, according to the National Interbank Funding Center on Nov 20.
This is the fourth release of the reformed LPR since the interest rate mechanism was revamped in August this year.
China cut the loan prime rate, a newly reformed interest rate to guide banks' loan price, on Nov 20 to lower corporate financing cost and stabilize economic growth amid rising headwinds.
