China slashes over-5-year LPR to 3.95%

20 Feb 24 1 min read

China has announced a substantial reduction in its over-five-year loan prime rate (LPR), the benchmark rate from which mortgage rates are derived, as per the National Interbank Funding Center. The rate was adjusted downward by 25 basis points to 3.95 per cent from its previous 4.2 per cent. This adjustment represents the largest cut since the inception of the over-five-year LPR as a benchmark in 2019.

While the over-five-year LPR saw a significant cut, the one-year LPR, a key rate for short-term borrowing, remains steady at 3.45 per cent.

The reduction in the LPR is anticipated to lower the cost of financing for both businesses and individuals. This strategic rate cut comes at a critical time as China seeks to ensure a steady economic recovery in early 2024, following previous adjustments to the LPR in August last year. At that time, the one-year rate was reduced to 3.45 per cent from 3.55 per cent, while the over-five-year rate remained unchanged at 4.2 per cent, according to Chinese media reports.

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