(Yicai Global) July 20 -- Borrowing in China might get more affordable even though the central bank has kept its key benchmark for one-year and five-year loans unchanged this month as expected, according to analysts.

The 12-month loan prime rate remains to be 3.55 percent this month while the five-year and above LPR, which affects mortgages, is kept at 4.2 percent, according to the National Interbank Funding Center. Last month, China lowered the one-year rate by 10 basis points and the long-term rate by 10 basis points.

The unchanged LPRs will not affect the continued decline in financing costs for the real economy in the third quarter, Golden Credit Rating predicted. The June cuts guided the actual lending rate to drop further, it added.

Even if the LPR rates are not updated, the actual lending rates could decline, as even small moves of LPRs have bigger effects on commercial lending, according to Everbright Securities. The central bank should rely on the rate to assess its effect on monetary policy.

China still needs to reduce its financing costs for the real economy, especially to guide the interest rates of new mortgages to drop, Golden Credit Rating said, adding that this year’s second reserve requirement ratio cut may happen in the third quarter.

The People's Bank of China has sufficient means to guide commercial lending rates to fall, Everbright Securities added. Reducing interest rates on issued mortgages can effectively curb the phenomenon of early repayment of loans and boost consumption growth and economic recovery.

Deposit rates may further be reduced due to the June LPR decreases and the continued drop in 10-year Treasury bond yields, which should ease banks' pressures to narrow their net interest margins and help them to reduce the financing costs for the real economy, even slash their rates for existing mortgage loans, Golden Credit Rating added.

Editor: Emmi Laine