LPR remains inactive for 11 consecutive months: stability is at the forefront

1、 The quotation remains stable and meets expectations, supported by both pricing basis and bank pressure

The LPR remains unchanged this time, fully in line with market expectations, thanks to the dual support of a stable pricing foundation and pressure from bank interest rate differentials. From the perspective of pricing logic, LPR is formed by adding points based on the open market operating rate (7-day reverse repo rate) by each quoting bank. Since the 7-day reverse repo rate was lowered in May 2025, it has remained unchanged at 1.4% for 11 consecutive months, providing a fundamental basis for LPR stability and lacking downward policy space.

On the other hand, the pressure of commercial bank interest rate differentials has constrained the possibility of LPR reduction. By the end of the fourth quarter of 2025, the net interest margin of commercial banks had dropped to a historic low of 1.42%. The repricing of loans at the beginning of the year further intensified the pressure to narrow the net interest margin in the first quarter, and the quoting banks lacked the motivation to actively lower their lending rates. Even if the financing costs in the money market had decreased, it was difficult to push for a synchronous reduction in LPR. This choice of "stable benchmark" not only alleviates the operational pressure on banks, but also ensures the stable operation of the financial system.

2、 The economy has a strong start, and monetary policy has entered an observation period

LPR has remained inactive for 11 consecutive months, driven by a strong macroeconomic start in 2026. Data shows that in the first quarter, domestic GDP grew by 5.0% year-on-year, falling on the upper edge of this year's "4.5-5%" growth target. Exports significantly exceeded expectations, investment growth stopped falling and rebounded, consumption continued to improve, high-tech manufacturing and other new quality productivity fields developed rapidly, and economic recovery momentum continued to strengthen.

Against the backdrop of economic stabilization and improvement, monetary policy does not need to rush to increase easing, but instead enters an "observation period", focusing on evaluating the effectiveness of previous structural policies, the quality of first quarter economic data, and the impact of external environmental changes. Meanwhile, since March, the geopolitical conflicts in the Middle East have pushed up international oil prices, causing a certain input impact on domestic prices. The necessity of interest rate cuts in the short term has decreased, and the policy focus has shifted towards the coordinated promotion of stable growth, stable prices, and stable credit.

3、 Stable and favorable mortgage interest rates continue to benefit people's livelihoods and physical demand

Many market entities are concerned that the unchanged LPR will push up housing loan costs, but this is not the case. The current mortgage interest rate adopts a pricing mechanism of "LPR+markup", and the stability of LPR does not hinder the downward trend of real interest rates. At present, the lower limit of the interest rate for first home commercial loans has been lowered to 50 basis points below the 5-year LPR. Based on the current LPR of 3.5%, the lowest actual interest rate for first home loans can reach 3.0%. The weighted average interest rate for newly issued first home loans nationwide has dropped to 3.1%, and the actual interest rate in some cities has fallen below 2.9% after adding local interest subsidies, fully entering the "3% era".