PBOC’s Beijing branch is studying measures to adjust rates on existing mortgage loans before LPR reform – report

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The PBOC’s Beijing branch is studying the policy to adjust the interest rates on existing home mortgage loans which existed before the country’s reform of the benchmark lending rate Loan Prime Rate (LPR) and will release the plan before September 25, reported Chinese newspaper The 21st Century Business Herald, citing sources in the Beijing branch of the central bank. 

In August 2019, China launched the LPR reform, in which the panel banks quote the LPR based on MLF rates and a comprehensive consideration of the cost of funds, risk premium and other factors, so as to fully reflect the market supply and demand. After the reform, the five-year LPR has been used a a reference rate for home mortgage loans. 

Before the LPR reform, different banks had implemented different lower limit for home mortgage rates and some banks with more home mortgage business may had higher rate floor than other banks, the report said.