LPR Cut Boosts Benefits for Businesses and People: How Effective?

On October 21st, the People's Bank of China authorized the National Interbank Offered Rate (LPR) to be published by the National Interbank Funding Center, with the 1-year LPR at 3.1% and the LPR for terms over 5 years at 3.6%, both decreasing by 25 basis points from the previous period.

Recently, reporters visited Beijing, Guangdong, Hubei, Fujian, and other places to perceive the effects of interest rate transmission from the front line.

It has brought tangible benefits to many enterprises.

The person in charge of a furniture manufacturing company on the eastern coast told reporters that the company had just applied for a loan of 4 million yuan, and the bank indicated that the loan interest rate could be reduced according to the latest LPR.

"Since this year, the loan interest rate has been continuously declining. For the same loan of 4 million yuan, it can save about 25,000 yuan in interest expenses per year compared to last year," the person in charge said. Furniture manufacturing companies are more sensitive to cost changes, and the reduction in interest expenses helps to reduce the financial costs in the fourth quarter.

Upon seeing the news of the LPR decline, Huang Hao, the head of the development strategy department of Guangdong Nanhai Qiming Guangda Technology Co., Ltd., is looking forward to the early arrival of the repricing date.

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"If the company's loan interest rate follows the LPR to decrease by 25 basis points, it can save at least 100,000 yuan in interest for the enterprise," Huang Hao told reporters. The company has always been focused on the research and development of nano conductive materials and flexible sensing technology and is currently in a rapid development stage. This year, the company also received a loan interest subsidy of 307,700 yuan from Guangdong Province for specialized and sophisticated small and medium-sized enterprises, coupled with the continuous decline in financing costs, the enterprise can invest more funds into promoting research and development, expanding production, and expanding sales.

Since the beginning of this year, the 1-year LPR has accumulated a decrease of 35 basis points, and the LPR for terms over 5 years has accumulated a decrease of 60 basis points. Driven by the decline in LPR, the interest rate on enterprise loans has further decreased. In September, the weighted average interest rate of newly issued enterprise loans was about 3.63%, which is about 21 basis points lower than the same period last year and is at a historical low.

At the Maofeng Agricultural Products Planting Professional Cooperative in Tianmen City, Hubei Province, the autumn grain purchase is being carried out in full swing. "At the beginning of October, the loan interest rate given by the bank to us was less than 3.3%, which decreased by 50 basis points compared to last year, and the financial pressure was greatly reduced. For subsequent loans and renewals, the Agricultural Bank of China Tianmen Branch will also reduce our loan interest rate according to the LPR situation," said Ni Shengsheng, the person in charge of the cooperative.

Kong Aiping, the general manager of the Farmer Finance Department of the Agricultural Bank of China Hubei Branch, told reporters that the LPR has decreased three times within the year, which can effectively reduce the production and operation costs of agricultural operators. Currently, the bank's new 1-year loan interest rate for farmers has decreased by 35 basis points compared to the beginning of the year.Ease the Burden of Residential Housing Consumption

The interest rates for newly issued commercial individual housing loans are linked to the LPR (Loan Prime Rate) for terms over five years. Interviews with journalists have revealed that many banks have adjusted their loan interest rates for various periods in reference to the new LPR.

Yan Yuejin, Deputy Dean of the Shanghai Yiju Real Estate Research Institute, stated that after the recent LPR decrease, except for cities like Beijing, Shanghai, and Shenzhen where mortgage interest rates may still be in the "3" range, an increasing number of cities have seen newly issued mortgage interest rates enter the "2" range.

"The developer's price is quite favorable, and with the interest rate dropping below 3%, I'm preparing to buy my first property after work," Ms. Huang, a citizen of Guangzhou, told reporters. She plans to take out a loan of 2 million yuan to buy a house, and with a 30-year equal principal and interest repayment plan, a 25 basis point decrease in interest rates can reduce the monthly payment by over 260 yuan, with a total interest savings of approximately 96,200 yuan.

In Guangzhou, the mainstream first-time home loan interest rate offered by major banks was previously LPR minus 85 basis points, or around 3%. After the LPR decrease, the newly issued first-time home loan interest rates in the area will continue to decline.

Dong Ximiao, Chief Researcher at China United, said that after the LPR decrease, both existing and new mortgage interest rates will further decrease, which will ease the burden of residential housing consumption for residents and enhance their willingness and ability to consume housing.

On October 23rd, reporters at the LianTou Yanyu Guangnian sales office in Qingshan District, Wuhan, saw many citizens visiting the property.

"After the LPR decrease, the number of customer visits in the past two days has increased by about 50%, and the transaction volume has also increased," said Liao Mengqi, the marketing head of the sales office. Previously, some customers hesitated due to repayment pressure, but after learning about the interest rate decrease, they decided to buy a house. A loan of 1.3 million yuan can save over 60,000 yuan in interest.

The policy effect of stabilizing growth is gradually becoming apparent. The downward trend of the LPR not only helps to alleviate the housing consumption burden on residents but also benefits in reducing the cost of major consumer goods."Reducing the financing costs for consumers helps to promote consumption, especially large-scale consumption including car purchases and home renovations, which also brings opportunities for banks to expand installment business," said the person in charge of the credit card business department of the Fujian branch of China Construction Bank. With the downward trend of LPR, the bank has launched preferential activities such as installment payment discounts, and the handling fee rate of the bank's large consumer credit product, Installment Pass, has decreased by 17% compared to the beginning of the year.

At present, doing a good job in the fourth quarter of economic work is crucial for ensuring the realization of the expected targets and tasks of economic and social development for the whole year.

"Three LPR decreases within the year can stimulate credit demand, and the policy effects of stable growth are gradually emerging," said Zeng Gang, director of the Shanghai Finance and Development Laboratory. After this LPR decrease, it will lead to a larger reduction in loan interest rates for enterprises and residents, thereby stimulating the financing demand of the real economy, promoting consumption, expanding investment, boosting economic growth momentum, and providing important support for the smooth completion of the annual economic and social development goals and tasks.