The headquarters of the People's Bank of China in Beijing Photo: IC

China cut its benchmark lending rates by 25 basis points (bps) on Monday, as authorities intensified monetary support to bolster the economy.

Experts noted that this rate cut will lower the cost of home purchases and reduce monthly payment pressures.

The one-year loan prime rate (LPR) dropped to 3.1 percent from 3.35 percent previously.

The over-five-year LPR, on which many lenders base their mortgage rates, was lowered to 3.6 percent from 3.85 percent, according to the National Interbank Funding Center.

The cut marks the third decrease this year and the largest reduction to date, China Media Group reported. The previous cut occurred in July. 

The adjustment, along with a series of measures to support China's high-quality development, will support sustained growth in the broader economy, Yan Yuejin, a vice president at Shanghai-based E-house China R&D Institute, told the Global Times on Monday.

For the property sector, the rate cut will significantly lower the cost of home purchases and reduce monthly payment pressures, Yan said.

Based on a loan principal of 1 million yuan ($140,586) and a 30-year term, the monthly payment would decrease by approximately 130 yuan. Following this cut, mortgage interest rates in many places will drop from about 3 percent to about 2 percent, Yan said.

Although the market anticipated a reduction in the LPR this month, the scale of the cut exceeded expectations, reflecting the financial sector's increased efforts to support and benefit the real economy, Zhou Maohua, an economist at China Everbright Bank, told the Global Times on Monday.

He added that the move is expected to stimulate investment across various sectors, fostering a more robust economic environment. 

The lower borrowing costs are also likely to boost consumer confidence and spending, Zhou added.

The cut of the LPR followed the reductions to other policy rates last month as part of a package of stimulus measures to stabilize the economy.

The People's Bank of China (PBC) announced cuts to banks' reserve requirement ratio by 50 bps and the benchmark seven-day reverse repo rate by 20 bps at the end of September.

China's central bank is considering a cut of 0.25 to 0.5 percentage points in the reserve requirement ratio at an appropriate time before the end of 2024, depending on market liquidity situations, PBC Governor Pan Gongsheng said on Friday.

China has recently introduced a package of financial measures to support the economy, and these policy moves have received positive feedback both at home and abroad, according to Pan. 

He added that these policies have bolstered social confidence and contributed to the stable operation of the economy and financial markets.