Event: on May 20, 2022, the national interbank lending center announced the new version of LPR quotation: 1-year varieties reported 3.70%, the last time was 3.70%, varieties over 5 years reported 4.45%, the last time was 4.60%.
We believe that the policy interest rate remained unchanged in May, and no comprehensive RRR reduction was implemented, while the five-year LPR quotation was reduced separately, indicating that under the consideration of “focusing on myself and taking into account both internal and external”, the monetary policy is strengthening countercyclical regulation, especially the directional support for real estate is continuously increasing, releasing a clear signal of stabilizing the real estate market, which is intended to alleviate the drag of the downturn of the real estate market on the macro economy, At the same time, it also helps to control the risks in key areas such as the default of head real estate enterprises. We judge that the reduction of the five-year LPR quotation in May is also a concrete implementation of the symposium held by Premier Li Keqiang in Yunnan on May 18, requiring “all regions and departments to enhance the sense of urgency, tap the policy potential, make full use of the accurate new measures, and do their best in May to ensure that the economic operation in the first half of the year and the whole year is within a reasonable range, and strive to make the economy return to the normal track quickly”.
I. why did the five-year LPR quotation in may be reduced separately?
Specifically, under the condition of fixed MLF interest rate, the reduction of LPR quotation often requires two consecutive comprehensive RRR reductions, while the RRR reduction in April is only the first time in continuous calculation (two comprehensive RRR reductions in July and December 2021 trigger the one-year LPR quotation to be reduced by 5 basis points in December). However, it is urgent to stimulate the main body of the real estate market to reduce the demand for loans and stabilize the operation of the real estate market. More importantly, driven by the wide margin of monetary policy, the market interest rate represented by the yield of interbank certificates of deposit has fallen sharply during this period. In addition, the regulators have made efforts to reduce the cost of bank deposits recently, so the power of quotation banks to reduce LPR quotation has been significantly enhanced, which finally led to the breaking of the conventional reduction of five-year LPR quotation in May.
We judge that the reason why the five-year LPR quotation is reduced by 15 basis points and the one-year LPR quotation remains unchanged this time is mainly because the current enterprise loan interest rate has been at the lowest point in more than 40 years of reform and opening up, while the residential mortgage interest rate is still at a high level; More importantly, since the beginning of the year, although the real estate financial environment has continued to pick up, affected by the epidemic situation and the operation law of the industry itself, the downward trend of the real estate market is still continuing, and its drag effect on the macro economy is increasing – among them, the growth rate of real estate investment from January to April has changed from positive to negative, and the housing related consumption in the total retail sales of social consumer goods has continued to grow negatively. Thus, following the central bank’s announcement on May 15 to cut the lower limit of the first home mortgage interest rate by 20 basis points, the five-year LPR quotation mainly for residential housing loans was also reduced by 15 basis points in May. This shows that the current policy is increasing the targeted interest rate cut in the face of the property market, which is intended to curb the downward trend of real estate. In terms of the current macroeconomic situation, the impact brought by the fluctuation of the epidemic is short-term, and the continuous decline of the real estate market since the second half of last year is the main reason for the increase of macroeconomic downward pressure.
Finally, the current downturn in the real estate market, weak demand for housing loans, and the market balance is leaning towards the lender, which is also a direct reason for the quotation banks to reduce the five-year LPR quotation.
