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China raises one-year interest rates

Source:   Time:

China has raised its deposit and lending interest rates for the second time in just over two months, as the government steps up its battle against inflation. But what do the changes mean for the general public?

The People's Bank of China is raising its benchmark lending rate to 5.81 percent. The deposit rate is also being upped, to 2.75 percent.

The changes look set to impact on China's savers and borrowers.

For savers, the adjustments bring some new year cheer. Annual interest on a 100-thousand yuan one-year deposit will rise from 25-hundred to 2,750 yuan, a 250-yuan increase.

But the higher lending rate is likely to further stretch home buyers.

For example, a homeowner with a 30-year mortgage of one million yuan will see monthly payments jump by nearly 300 yuan per month -- from less than six-thousand to more than 62-hundred. The total loan to pay back soars from 2.1 to 2.2 million yuan.

It's hoped the measures will put a damper on the real estate market, creating tighter budgets for prospective home buyers.

Experts also expect the hikes to curb a surge in lending, which has been fueling recent inflation, as China's economy rebounds from the global financial crisis.

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