The loan market quoted interest rate (LPR) has experienced its first decline of the year. On May 20, the People's Bank of China (hereinafter referred to as "the Central Bank") authorized the National Interbank Funding Center to announce that on May 20, the 1-year LPR was 3% and the 5-year LPR was 3.5%. Both varieties showed a 10 basis point decrease in LPR compared to their previous values. The LPR reduction this time is within market expectations. When announcing the 0.1 percentage point reduction in policy interest rates at a press conference held by the State Council Information Office on May 7th, the Governor of the People's Bank of China, Pan Gongsheng, mentioned that "it is expected to drive the LPR down by about 0.1 percentage points synchronously. ”Looking ahead to the later stage, Wang Qing, Chief Macro Analyst of Dongfang Jincheng, told reporters that the current external environment still faces great uncertainty, and the domestic policy of stabilizing growth cannot be relaxed yet. It is expected that the central bank will continue to implement interest rate cuts in the second half of the year, which means that there is still room for the LPR of the two maturity varieties to decline within the year. The downward adjustment of LPR is in line with market expectations. Currently, the 7-day reverse repo rate, as the main policy rate, has become the new "pricing anchor" for LPR. The central bank recently lowered the policy interest rate by 0.1 percentage points, which means that the 7-day reverse repo operation rate was lowered from 1.5% to 1.4%. Therefore, the 10 basis point reduction in LPR this month can be considered "natural". In Wang Qing's view, lowering policy interest rates and guiding the downward trend of LPR will drive down loan interest rates for enterprises and residents to a greater extent, reducing the financing costs of the real economy. This is an important driving force for expanding investment and promoting consumption at the current stage, and also helps alleviate the phenomenon of high actual loan interest rates for enterprises and residents after taking into account price factors, stimulating endogenous financing demand for enterprises and residents. The improvement of bank debt costs has also created space for the downward adjustment of LPR. Wen Bin, Chief Economist of Minsheng Bank, told reporters that the two reductions in deposit listing interest rates last year, the suspension of "manual interest payments", and the control of interbank demand deposit interest rates have continued to be effective in controlling the bank's liability costs, partially offsetting the downward pressure on asset yields. Meanwhile, on May 15th, a 0.5 percentage point reserve requirement ratio cut was officially implemented, providing the market with long-term liquidity of approximately 1 trillion yuan. Lowering reserve requirement ratios can optimize the structure of liquidity provided by the central bank to the banking system, reduce the cost of bank liabilities, and enhance the stability of bank liabilities. It is worth mentioning that on May 20th, a new round of deposit interest rate cuts began. From the perspective of state-owned banks, the interest rate for current deposits has been lowered by 5 basis points; The interest rates for three-month, six-month, one-year, and two-year fixed deposits have all been reduced by 15 basis points, while the interest rates for three-year and five-year fixed deposits have been reduced by 25 basis points; The 7-day notice deposit interest rate has been reduced by 15 basis points. Wang Qing believes that the recent reduction in deposit interest rates by major state-owned banks and the subsequent adjustment by other commercial banks will lead to an overall decrease in deposit interest rates by 0.11 percentage points to around 0.13 percentage points, which can basically cover the impact of the LPR reduction on various loan interest rates and stabilize the bank's net interest margin. Further reducing the cost of purchasing a house is closely related to the LPR of over 5 years and the cost of purchasing a house. The 10 basis point reduction in LPR for periods over 5 years will undoubtedly guide mortgage interest rates in various regions to further decline and continue to lower the cost of home ownership for homebuyers. Taking Beijing as an example, data from the China Index Research Institute shows that the previously implemented loan interest rates for first and second homes were 3.15% (LPR-45 basis points), 3.35% (LPR-25 basis points outside the Fifth Ring Road), and 3.55% (LPR-5 basis points inside the Fifth Ring Road), respectively; After this reduction, the loan interest rates for first and second homes in Beijing are expected to be adjusted to 3.05% (LPR-45 basis points), 3.25% (LPR-25 basis points outside the Fifth Ring Road), and 3.45% (LPR-5 basis points inside the Fifth Ring Road), respectively. Among them, the loan interest rates for first and second homes outside the Fifth Ring Road have both dropped to historical lows. Chen Wenjing, Director of Policy Research at Zhongzhi Research Institute, told reporters that the LPR reduction this time will also drive down the interest rates of existing housing loans. After the repricing of housing loan interest rates, the interest rates of existing housing loans can be lowered accordingly, reducing the pressure on residents who have already purchased houses to repay their loans. In addition to the 5-year LPR reduction, the package of financial policies announced by the central bank on May 7th also includes a 0.25 percentage point reduction in personal housing provident fund loan interest rates. Among them, the interest rate for first-time homebuyers with a term of more than five years has been reduced from 2.85% to 2.6%, and the interest rates for other terms have been adjusted synchronously. It is expected to save more than 20 billion yuan in annual interest expenses for residents' housing provident fund loans, which is conducive to supporting the rigid housing demand of households and helping to stabilize the real estate market. Chen Wenjing said, "Overall, the recent decrease in housing provident fund loan interest rates and the reduction of LPR for more than 5 years will further reduce the purchasing costs for homebuyers, support the release of residents' housing demand, and play a positive role in consolidating the stable situation of the real estate market. ”(New Society)