(Yicai) Nov. 21 -- China kept its loan prime rates unchanged at historic lows this month for the sixth consecutive month, in line with market expectations.

The one-year loan prime rate, a key reference for consumer and corporate loans, was held at 3 percent, and the over-five-year LPR, which guides mortgage rates, remained at 3.5 percent, the National Interbank Funding Center authorized by the People’s Bank of China announced yesterday.

Both rates were lowered to current levels in May to stimulate economic activity and have since remained steady.

The main reason for not changing the LPR is the overall decline in financing costs, which is an important indication of relatively loose monetary conditions, said Dong Ximiao, chief researcher at Merchants Union Consumer Finance.

Financing costs for enterprises and households have declined in recent years, indicating that monetary conditions are relatively loose and the supply of funds is ample, Dong noted, adding that in this context, lowering the LPR is not an urgent priority.

The LPR quotations have remained primarily because the macroeconomic trend has been relatively strong, driven by factors such as better-than-expected exports and the rapid development of domestic new quality productive forces, said Wang Qing, chief macroeconomic analyst at Golden Credit Rating International.

Therefore, the need for counter-cyclical adjustments has decreased, and monetary policy has maintained a strong degree of stability, Wang pointed out.

Moreover, some other industry insiders believe that another reason remains the continued pressure from narrowing net interest margins, as there is a lack of motivation for banks to proactively lower the LPR quotation spreads.

The net interest margin of Chinese commercial banks was 1.42 percent at the end of the third quarter, unchanged from the end of the second quarter but down from 1.52 percent a year earlier.

Even though the economic growth has slowed due to internal and external factors, Dong believes that there is still some room for a moderately accommodative monetary policy in the near future, even though its marginal effectiveness has significantly decreased.

Attention should also be paid to potential adverse effects of excessively loosening monetary and financial conditions, such as fund idling and increased volatility in the capital markets, Dong noted. Therefore, the market should lower its expectations for upcoming large cuts in the reserve requirement ratio and interest rates.

The growth-stabilizing policies are likely to move out of the observation phase and enter a phase of active implementation, Wang said. Policies to stabilize the real estate market need to be further strengthened, and it is expected that regulatory authorities may lower the over five-year LPR to facilitate a more significant reduction in mortgage rates, he added.

Editor: Futura Costaglione