China's central bank has made its largest-ever cut to the key mortgage reference rate, reducing the five-year loan prime rate from 4.2% to 3.95% in an effort to bolster the housing market, which has been hobbled by a prolonged property crisis since 2021. The move aims to reduce pressure on the property sector and revive new home sales, as dozens of major developers have defaulted on their debt and the crisis has triggered widespread protests. China's economy also faces challenges such as deflation, low confidence, accelerated capital flight, and a prolonged stock market slump.
China's central bank has made its largest-ever cut to the key mortgage reference rate, reducing the five-year loan prime rate (LPR) from 4.2% to 3.95% in an effort to bolster the housing market amidst a prolonged property crisis. The move aims to reduce pressure on the property sector, which has been hobbled by a real estate downturn since 2021, triggering a liquidity crisis and defaults by major developers. China's economy also faces deflation, low confidence, accelerated capital flight, and a significant decline in foreign direct investment, reflecting growing concerns about political risks and economic outlook.
The average 30-year fixed-rate mortgage rate has reached its highest level in over 20 years, according to Freddie Mac. The rate currently stands at 7.09 percent, driven by the strength of the economy and the rise of the 10-year Treasury yield. Affordability challenges and low inventory continue to impact demand and stall home sales. This week's rate is 0.13 percent higher than last week's and 1.96 percent higher than the same time last year.
