Chinese central bank effectively cut the mortgage rates in an attempt to prop up the ailing housing market and boost the slowing economy.
The People’s Bank of China announced the interest rate as low as 4.4%, down from 4.6% previously. The change is aimed at supporting housing demand and will “promote the stable and healthy development of the property market,” the PBOC said.
The cut “sends a loud and clear signal that policymakers are pushing for property policy easing with concrete measures,” Goldman Sachs Group Inc. economists led by Maggie Wei wrote in a report.
“This announcement looks to be a step in the right direction, and more important than the previous local easing given that this is a national-level policy, but we think still more support is needed to stabilize the market.”
The decision to cut rates comes after a collapse in mortgage lending in April, with data released Friday showing a 60.5 billion yuan ($8.9 billion) contraction in new mortgages.
That was despite repeated attempts by local governments to boost demand by loosening regulations and controls on property in cities and provinces across the country and signals from the central government that it would do more to stimulate the economy and the housing market.
Also on Sunday Shanghai announced that it would start gradually reopening from the six-week lockdown that has decimated activity and stopped industrial output in China’s most economically important city, as well as clogging the world’s largest port.
However, based on how long it took other cities such as Xi’an or Changchun to return to anything like normal life after their lockdowns, the disruptions in Shanghai will continue for some time.