(Yicai) Nov. 20 -- China may slash the benchmark for mortgage rates in the future after keeping loan prime rates unchanged this month, according to Golden Credit Rating.
The five-year LPR may drop by 0.3 to 0.4 percentage points in the future to further push down interest rates of residential mortgages to improve expectations in the property market, guiding its way to a soft landing as soon as possible, per the credit rating agency. Five-year LPR influences mortgages whereas one-year LPR affects most new loans.
The National Interbank Funding Center announced today that the one-year LPR will be kept at 3.45 percent while the five-year one remains to be 4.2 percent, with no changes from last month's review. Moreover, the rate of medium-term lending facility remained the same at 2.5 percent on Nov. 15 when the People's Bank of China launched MLF operations of CNY1.45 trillion (USD202 billion).
Golden Credit Rating said that the reserve requirement ratio may fall by 0.25 percentage points by year-end due to liquidity demand prompted by the issuance of loans, special refinancing bonds, and treasury bonds, as well as banks' need to optimize their liquidity structures while reducing their capital costs.
Easing liquidity buffering via an RRR cut could make financial support for the real economy more sustainable, improve coordination with fiscal policies, provide a better environment for government debt issuance, and maintain the stability of the financial market when the year ends, Everbright Securities pointed out.
Macroeconomic and financial data have been generally good in recent months as the economy is expected to continue to recover with supportive policies, said Zhou Maohua, a macroeconomist from China Everbright Bank. However, some banks continue to face great pressure on net interest margins.
The LPR is expected to remain stable before the end of the year, and any adjustments of interest rates and LPR need to wait for further guidance provided by subsequent macroeconomic data, Zhou added.
Editor: Emmi Laine