China has lowered the rate on mortgage loans for the first time in two years

China has lowered its reference rate for mortgage lending for the first time in nearly two years, adding to a cycle of gradual monetary easing as policymakers seek to counter the loss of economic momentum.

The primary rate on a five-year loan, commonly used to determine the price of mortgages, was cut on Thursday from 4.65 percent to 4.6 percent. The one-year equivalent, which is widely used for other forms of lending, fell from 3.8 percent to 3.7 percent, following a previous cut in December.

The measures were expected after the National Bank of China’s press conference on Tuesday, at which officials hinted at further easing in the background weakening of the economy.

The Central Bureau of Statistics on Monday released data showing the slowest annual growth rate in nearly 18 months. The government is dealing with a key slowdown in the country real estate sector and long-term consumption weaknesses.

“These cuts are too small to have a material impact, as they are unlikely to be enough to remove real bottlenecks and because rates on existing mortgage loans will not be reset this year,” said Ting Lu, China’s chief economist at Nomura.

China cut several important rates in early 2020 in response to the economic shock of the initial coronavirus epidemic. Later that year, at a time of growing concern about asset bubbles, he introduced tougher measures that limited the impact on real estate investors.

The liquidity crisis in the entire real estate sector, focused on the long-term non-payment of Evergrande, the world’s most indebted investor, has hit land and housing sales and put pressure on policymakers to support the economy.

The PBoC reduced the reserve requirement ratio several times last year, a metric that affects bank loans, but did not change its reference base interest rates until December.

Chinese markets were slightly shifted on Thursday, with the CSI index of 300 large stocks listed in Shanghai and Shenzhen rising just 0.9 percent. Analysts said this was partly because the PBoC cut its medium-term interest rate on Monday, which serves as the lower limit for the LPR.

“Today’s decline in LPR was expected and has already been assessed by the market,” said Bruce Pang, head of research at China Renaissance.

Pang added that Chinese stocks were down after recent comments from top officials, who did not promise a significant concession even as Beijing struggles with numerous Covid-19 epidemics across the country.

“The PBoC could make more concessions, but not in the form of another rate cut in the near future, unless there are permanent obstacles to China’s recovery,” Pang said.