China has slashed its mortgage lending rate for the second time this year as the country’s central bank seeks to limit the fallout from a liquidity crisis in the property sector, reports the Financial Times. The five-year loan prime rate was lowered to 4.3% from 4.45% on Monday, exceeding the median forecast from economists polled by Bloomberg and equalling a rate cut in May that was the largest on record.
The reduction in the benchmark loan prime rate will cut borrowing costs on new mortgages nationwide and boost the country’s debt-laden real estate sector, which accounts for almost a third of annual economic output.
The LPR is based on the rates offered by domestic and foreign lenders to their best customers in mainland China, but is subject to various channels of influence from the People’s Bank of China. These include unofficial guidance and the central bank’s so-called medium-term lending facility rates, which serve as floors for the country’s lending benchmarks. The one-year LPR, which is also based on Chinese lending rates and primarily used to price corporate loans, was cut to 3.65% from 3.7%.
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