(Yicai Global) April 20 -- China’s Loan Prime Rate, the country’s benchmark lending rate to which mortgage rates are anchored, thwarted market expectations and remained unchanged this month. But many industry insiders believe that mortgage rates will be lowered in the second quarter as part of a new round of monetary easing to underpin the economy.

The one-year LPR and five-year LPR for April stayed unchanged at 3.7 percent and 4.6 percent respectively, the People’s Bank of China said today. The rate has stayed the same for three months now, despite the 0.25 percentage point reduction in the reserve requirement ratio for banks on April 15.

The recent RRR cut and other measures have yet to reduce bank costs by 5 basis points, which is the smallest reduction in LPR, and the Medium-term Lending Facility, to which it is tied, has stayed the same, both are the reasons that the LPR has not changed, analysts said. 

The LPR is very likely to be lowered by 10 to 15 basis points in May and June looking at the weakened state of the property market and the unstable macro economy caused by the pandemic, said Wang Qing, chief macroeconomic analyst of Golden Credit Rating. There will also probably be another RRR cut in the second quarter.

April mortgage rates for first- and second-home purchases in China’s 103 biggest cities were 5.17 percent and 5.45 percent respectively, the lowest level since 2019, according to Beike Research Institute’s figures.

As housing credit relaxes, lenders might be more willing to reduce mortgage rates and cut the downpayment ratio, said Xu Xiaole, chief market analyst at Beike Research. Interest rates for first-home purchases could fall to the benchmark of 4.6 percent.

Editor: Kim Taylor