Hua Xia Shi Bao·2025-05-20 02:25Core Viewpoint - The People's Bank of China announced a reduction in the Loan Prime Rate (LPR) by 10 basis points for both the 1-year and 5-year terms, marking a shift after nearly six months of stability, aligning with market expectations and recent monetary policy adjustments [2][6][11]. Summary by Relevant Sections LPR Adjustment - The 1-year LPR is now set at 3.00%, and the 5-year LPR at 3.50%, both down by 10 basis points from previous levels [2][3]. - This is the first LPR adjustment since October 2024, when both terms were reduced by 25 basis points [3][4]. - Cumulatively, the 1-year LPR has decreased by 35 basis points and the 5-year LPR by 60 basis points throughout 2024 [5]. Economic Context - The LPR reduction is a response to the escalation of the US-China trade conflict in April, necessitating stronger counter-cyclical adjustments in macroeconomic policy [6][11]. - Analysts suggest that lowering the LPR will reduce financing costs for businesses and households, stimulating domestic demand to offset external economic slowdowns [6][7]. Impact on Housing Market - The LPR cut is expected to lower mortgage costs, thereby promoting housing consumption [7][8]. - For a typical 1 million yuan mortgage over 30 years, the monthly payment could decrease by 54 yuan, leading to a total repayment reduction of 19,000 yuan [8]. Bank Responses - Major state-owned banks have proactively lowered deposit rates in anticipation of the LPR adjustment, with some rates falling below 1% for the first time [2][12]. - Specific adjustments include a reduction in the 1-year fixed deposit rate to 0.95% and a decrease in the 7-day notice deposit rate to 0.30% [12][13]. Future Outlook - Analysts predict that further LPR reductions may occur later in the year, influenced by ongoing economic conditions and the need for continued support for the housing market [11]. - The current mortgage rates are considered historically low, providing a favorable environment for homebuyers [10].