(Yicai) Feb. 20 -- China’s central bank has lowered its long-term loan prime rate, the benchmark to which mortgages, corporate loans, and fixed-asset investments are anchored, for the first time this year.

The People’s Bank of China today cut the over five-year LPR by 25 basis points to 3.95 percent. The one-year LPR remains unchanged at 3.45 percent. Both rates are at record lows.

The bank last cut the LPR in August, lowering the one-year rate by 10 bps to 3.55 percent to help steady investment, consumption, and economic growth as well as support the real estate market. The five-year LPR stayed at 4.2 percent.

Today’s cut had been much anticipated despite the PBOC keeping its medium-term lending facility rate, a leading indicator for the LPR, unchanged this month.

The PBOC announced at the end of January that it would cut the reserve requirement ratio for banks by 50 bps from Feb. 5, releasing over CNY1 trillion (USD138.9 billion) of long-term funding. The bank also said it would lower the refinancing and rediscount interest rates by 25 bps to 1.75 percent to support agriculture and small enterprises.

PBOC Governor Pan Gongsheng said then that the moves would help drive down the LPR. The market generally expects the US Federal Reserve to start paring lending rates sometime this year, which will also help to enlarge the operational space of China’s monetary policy.

The five-year LPR was trimmed by just 65 bps between September 2019 and last month, compared with 75 bps for the one-year LPR, so there is still further scope for cutting the long-term benchmark, Song Xuetao, chief macro researcher at TF Securities, said on Feb. 18.

Song also pointed out that a bigger reduction in the five-year rate can lower the cost of buying a home and ease financing costs for property developers, while also sending a more positive signal to the market.

Editor: Futura Costaglione