(Yicai Global) Jan. 20 -- The People’s Bank of China has lowered the Loan Prime Rate, the country’s benchmark lending rate which is reset each month, for both one-year and five-year loans as part of a new round of monetary easing to underpin the economy.

The five-year LPR, on which lenders mainly set their mortgage rates, has been chopped by five basis points to 4.6 percent, the PBOC said today. It is the first cut since April 2020.

The one-year LPR, the lending benchmark for new bank loans to households and businesses, was slashed by 10 basis points to 3.7 percent. This is on top of a five basis point markdown last month.

The reduction in the five-year LPR will lower financing costs for real estate developers and encourage them to invest in new projects, said Yan Yuejin, head of research at think tank Shanghai E-house Real Estate Research Institute.

The trimmed LPR can help save costs and stabilize confidence among home buyers, said Zhong Zhengsheng, chief economist at Ping An Securities.

The government has been ramping up measures in recent weeks to reduce financing costs in the real economy and ease the downward pressure on the property market. Earlier this week, the central bank slashed the rate of its one-year medium-term lending facility by 0.1 percentage point to 2.85 percent. And last month it lowered the reserve requirement ratio for banks by 0.5 percentage point.

And there is more to come, said Ming Ming, co-chief economist at Citic Securities. There are likely to be one or two more interest rate cuts in March or June, he said.

The possibility that the central bank will further lower the RRR cannot be ruled out, said Tang Jianwei, chief researcher at the Bank of Communications’ Financial Research Center.

Editors: Tang Shihua, Kim Taylor