The LPR remained unchanged in April. Industry insiders predict that the policy interest rate cut in Q2 will drive the LPR down. There is room for a reduction in mortgage rates within the year.

Today, the People's Bank of China authorized the National Interbank Funding Center to announce that the Loan Prime Rate (LPR) for April 2025 is: the 1-year LPR at 3.1% and the 5-year and above LPR at 3.6%, with both LPR quotes remaining unchanged MoM. Several industry insiders analyzed to Cailian Press that the unchanged LPR in April aligns with market expectations. The main reason is the stability of the 7-day reverse repo rate anchor, with banks continuing to face certain net interest margin pressures, and quoting banks lacking the motivation to lower the LPR quote. Additionally, the strong economic trend in Q1 reduces the urgency to lower the LPR quote. Looking ahead, the industry expects that the next significant policy rate cut will drive the LPR quote down, thereby guiding the reduction of loan interest rates for enterprises and residents, significantly lowering the financing costs of the real economy. The urgency to lower the LPR is not strong, with the LPR quote remaining flat for six consecutive months. For the unchanged LPR quote in April, several industry insiders analyzed that it aligns with market expectations. Wang Qing, Chief Macro Analyst at Oriental Jincheng, told Cailian Press that, first, the policy rate (the central bank's 7-day reverse repo rate) has remained unchanged since April. This means that the pricing basis for this month's LPR quote has not changed, largely indicating that the April LPR quote would remain unchanged. "Second, the current net interest margin of banks is at a historical low, and quoting banks lack the motivation to actively lower the LPR quote. Overall, the continuous unchanged LPR quote since the beginning of the year is fundamentally due to the strong economic trend in Q1. Thus, although the monetary policy stance has shifted from prudent to moderately loose, the urgency to lower the LPR quote is not strong," Wang Qing said. "The April LPR quote remains flat, despite the tariff impact at the beginning of the month, but the overall rate cut tool has not yet been activated," Zhao Yi, Macro Analyst at CITIC Securities, told Cailian Press. In terms of internal factors, the liquidity gap in April is relatively small, with the funding situation being more relaxed compared to March, and the MLF maturity pressure is only 100 billion yuan, making the liability side pressure of commercial banks relatively controllable, and the urgency for reverse repo rate cuts is not high. Despite the tariff impact, the stock market sentiment has shown strong resilience, and the Q1 economic data exceeded expectations, reducing the necessity for the rapid implementation of broad monetary tools to stabilize market expectations. In terms of external conditions, Zhao Yi further stated that there was no FOMC meeting in April, and the long-term impact of the tariff impact may further increase exchange rate pressure; the offshore RMB exchange rate once rose above 7.4 at the beginning of April, although it has now returned to around 7.3, future uncertainties remain high, and the overall rate cut operation may wait for a better opportunity. The market expects that the policy rate cut in Q2 will drive the LPR quote down. Looking ahead, Wang Qing expects that the policy rate cut in Q2 will drive the LPR quote down. Wang Qing believes that, considering the changes in the external economic and trade environment, the domestic real estate market, and price trends, the timing for "opportunistic RRR and rate cuts" in Q2 is ripe, and it is not ruled out that it may be brought forward to April. Wang Qing judges that the rate cut this time may reach 30 basis points, equivalent to the rate cut for the whole of last year. This means that the next significant policy rate cut will drive the LPR quote down, thereby guiding the reduction of loan interest rates for enterprises and residents, significantly lowering the financing costs of the real economy. "This is one of the effective measures to promote consumption, expand investment, vigorously boost domestic demand, hedge against potential external demand slowdown, and effectively enhance macroeconomic resilience. This also means that this year's extraordinary counter-cyclical adjustment has fully started," Wang Qing said. In the future, the LPR quote will bring certain net interest margin narrowing pressure to banks, which will mainly be alleviated by guiding deposit rates down and comprehensively reducing bank funding costs. Zhao Yi believes that, reviewing the use path of the central bank's monetary policy tools after the first round of tariff impact from 2018 to 2019, combined with the current basic recovery situation, the pace of stock market recovery, and exchange rate pressure, it is expected that the short-term monetary end may focus on expectation management, retaining policy space to deal with potential future impacts of tariffs and other factors; looking ahead, it is expected that the policy priority may be RRR cuts over rate cuts, and the operation timing may need to observe the subsequent FOMC meeting interest rate decisions of the US Fed; if the US Fed resumes rate cut operations, it is not ruled out that the central bank of China may follow up with the use of broad monetary tools. The 5-year and above LPR is closely related to mortgage rates. Wang Xiaoqiang, Chief Analyst at Linping Residential Big Data Research Institute, told Cailian Press in an interview that, from the current market perspective, although the trading volume has increased significantly YoY, the trend of housing prices stopping the decline has weakened, and market confidence is still hovering at the bottom. Next, promoting the housing market to stop the decline is still the main policy direction, and lowering mortgage rates reduces the cost of purchasing a house, which is the most common stimulus measure on the demand side, conducive to promoting the activity of the real estate market. Within the year, there is room for mortgage rates to fall. The previously released "Action Plan to Boost Consumption" mentioned the timely reduction of the housing provident fund loan rate. Wang Xiaoqiang said that the plan was announced in March this year, and it has just been one month. On one hand, the current housing provident fund loan rate is already at a historically low value, with the loan rate for 5 years and above already falling below 3%; on the other hand, since Q4 last year, both volume and price have shown signs of improvement, and the trading volume at the beginning of 2025 is impressive, so the housing provident fund has not been adjusted yet, and the commercial loan LPR has not been lowered this year. Under the background that the current income expectation has not significantly improved and the housing price stop decline is hindered, it is expected that there is still considerable room for the housing provident fund to fall this year, most likely in May or October this year. "The adjustment of the housing provident fund rate needs to wait for the overall tone of the LPR (Loan Prime Rate) to be set," Yan Yuejin, Vice President of Shanghai Yiju Real Estate Research Institute, told Cailian Press in an interview. Currently, the housing provident fund's ability to issue loans and support is strong, and the housing provident fund rate cut is only a matter of time.