The picture shows a view of the People's Bank of China. (Xinhua photo)

China's one-year loan prime rate (LPR), a market-based benchmark lending rate, was lowered to 3.0 percent on Tuesday, down by 10 basis points, in the central bank's first cut of the rate this year.

The over-five-year LPR, on which many lenders base their home mortgage rates, dropped to 3.5 percent from 3.6 percent previously, according to the National Interbank Funding Center.

The cut will further reduce borrowing costs for businesses and individuals, helping bolster market confidence and supporting the steady growth of the real economy, according to the Xinhua News Agency.

On May 7, the People's Bank of China (PBC), the central bank, announced a series of rate cuts, including a reduction in the seven-day reverse repo rate and interest rates for the standing lending facility, to better implement its moderately loose monetary policy and enhance support for the real economy.

PBC Governor Pan Gongsheng said the policy rate reduction was expected to lead the LPR, a market-based benchmark lending rate, down by 0.1 percentage points.

Although China and the US moved to slash tariffs following their Geneva trade talks, there are still lingering external uncertainties in the context of trade friction, and this has weighed on market expectations, as well as the outlook for export growth and the pace at which companies, industries and residents borrow from banks, Wen Bin, chief economist at China Minsheng Bank, told the Global Times on Tuesday.

Against this backdrop, the moderate cut in the LPR, which will guide market lending rates down further, serves to further stimulate effective credit demand, stabilize overall lending and assist the stable development of the economy, Wen said.

Chinese banks issued 9.78 trillion yuan ($1.36 trillion) in new yuan-denominated loans in the first quarter, per central bank data. As of end-March, outstanding yuan loans amounted to 265.41 trillion yuan, up 7.4 percent year-on-year.

However, the growth of outstanding yuan loans slowed to 7.2 percent year-on-year in the first four months, to reach 265.7 trillion yuan as of end-April.

"The cut in the LPR, the first this year, shows that the comprehensive financial policy package has led to further easing of monetary and credit policies, which in turn has reduced medium- and long-term borrowing costs," Yan Yuejin, research director at Shanghai-based E-house China R&D Institute, told the Global Times on Tuesday.

"The policy to further reduce interest rates will help lower the cost of home mortgages, which also should stimulate housing consumption," Yan said.

For a 30-year housing mortgage loan with a value of 1 million yuan, the cut in the LPR should bring a sum cost reduction in principal and interest by 19,000 yuan, Yan estimated.

On Tuesday morning, China's major state-owned commercial banks and some joint-stock banks announced reductions in deposit interest rates.

The one-year fixed-term deposit interest rate was cut by 15 basis points to 0.95 percent, according to the official deposit interest rates announced by Industrial and Commercial Bank of China, Bank of China, China Construction Bank, Agricultural Bank of China and Bank of Communications.

The moves were in accordance with overall rate reductions and aim to support the real economy, according to industry experts.

China Merchants Bank, a joint-stock bank based in Shenzhen, South China's Guangdong Province, also cut its deposit interest rate, with the one-year fixed-term deposit interest rate being reduced to 0.95 percent.

Following the banks' announcements on Tuesday, the one-year fixed-term deposit interest rate has moved below 1 percent, according to the Securities Times.

The latest round of deposit interest rate reductions for state-owned banks followed two rounds of cuts in 2024, according to media reports.