The mainland credit rating agency Dongfang Jincheng published a report stating that this morning the People's Bank authorized the National Interbank Lending Center to announce the new version of the LPR Quote, with the one-year term reporting 3% (3% in April); the five-year and above term reporting 3.5% (3.5% in April). Dongfang Jincheng pointed out that the LPR quotes for the two terms in June remained unchanged, in line with market expectations. The main reason is that after the policy rate cut implemented by the People's Bank in May, the LPR quotes for both terms in the same month were adjusted downward simultaneously, currently transmitting to loan rates; since the policy rates remained unchanged in June, the factors affecting the LPR's rate increases have not changed significantly, and therefore, it meets market expectations that the LPR quotes for both terms in June remain unchanged. The bank expects that in the short term, it will enter a policy observation period, and the LPR quotes may continue to remain stable.
Looking ahead, the external environment in the second half of the year still faces significant uncertainty. In the process of vigorously boosting domestic demand and "pushing for greater efforts to stabilize the real estate market," there is still room for LPR quotes to adjust downward. Given that the China-U.S. economic and trade negotiations will experience a complex and tortuous process, the impact of external environment fluctuations on exports will mainly manifest in the second half of the year. In the backdrop of relatively low price levels, it is expected that the central bank will continue to cut interest rates in the second half of the year, leading to downward adjustments in LPR quotes for both terms. This will guide greater reductions in loan rates for enterprises and residents, lower financing costs for the real economy, and stimulate endogenous financing demand, serving as an important point of focus for promoting investment and consumption in the second half of the year while mitigating external shocks.
In addition, considering that policies to stabilize the real estate market need to be strengthened in the second half of the year, especially since on May 7, the People's Bank announced a 0.25 percentage point reduction in the provident fund loan rate, this opens up space for subsequent reductions in residential commercial mortgage rates. It is expected that in the second half of the year, regulatory authorities may guide the downward adjustment of LPR quotes for terms over five years separately, thereby pushing for larger reductions in residential mortgage rates. This is a key step to alleviate the issue of high actual mortgage rates, stimulate housing demand, and reverse expectations in the housing market.
