An employee counts Chinese yuan at the personal finance service area of a bank in Haian, east China's Jiangsu province, 15 September 2023.
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China's lenders cut the country's benchmark five-year loan rate for the first time since June, extending Beijing's efforts to revive the country's flagging real estate market.
China's central bank left its key one-year lending rate – the peg for most household and corporate loans in China – unchanged at 3.45%. The benchmark five-year loan rate – the rate set for most mortgages – was cut by 25 basis points to 3.95%, according to a statement from the People's Bank of China on Tuesday.
The cut in the five-year fixed monthly rate for February was larger than expectations for a cut of between five and 15 basis points in a Portal poll of economists. It was also the first since the last 10 basis point cut in June.
“So for potential home buyers, the financing costs of buying a home and taking out a mortgage are much, much lower. I think in terms of market reaction, we need a little more time,” William Ma, chief investment officer at GROW Investment Group, told CNBC.
“But at the same time, I think this is also a… good sign that the Chinese government and regulator is showing market participants that the banks are healthy too – that's very important,” he added. “So I think the 25 basis point cut is definitely a very positive sign from my perspective.”
China calculates its key lending rates every month after 20 designated commercial lenders submit their rate proposals to the PBOC. These key lending rates usually move in line with the medium-term key interest rate, which the PBOC left unchanged for February on Sunday.
China cut reserve requirements for its banks by 50 basis points starting Feb. 5 and provided 1 trillion yuan ($139.8 billion) in long-term capital. At the same time, it called on banks to support loans for high-quality real estate developers.
The real estate market slumped after Beijing cracked down on developers' heavy reliance on debt for growth in 2020, plunging some of its biggest real estate developers into bankruptcy and weighing on consumer growth and broader growth in the world's second-largest economy.
—CNBC's Lee Ying Shan contributed to this story.