CFIC Introduction
Original title: [Xinhua Interpretation] The arrangement for the reduction of the interest rate of the existing mortgage is clear, what is the change in your monthly payment?
There is a clear arrangement for the reduction of the interest rate of the existing housing loan!
According to the initiative issued by the People's Bank of China's self-discipline mechanism for guiding market interest rate pricing on the 29th, all commercial banks will uniformly implement batch adjustments to the existing housing loan interest rate by October 31, and the existing housing loan interest rate in cities that have been abolished will be reduced to no less than the loan market quotation rate (LPR) minus 30 basis points. Let's see how your mortgage interest rate has changed –
The first, second and above sets are all adjusted, and there are arrangements for Beijing, Shanghai and Shenzhen
Under the guidance of the People's Bank of China, the interest rate self-discipline mechanism clearly states that the existing housing loans adjusted by commercial banks include the first, second and above, and the interest rate is reduced to no less than LPR minus 30 basis points, and not lower than the lower limit of the interest rate of newly issued commercial banks for personal housing loans (if any) currently implemented in the city.
The reporter learned from the People's Bank of China that as of the end of July, the weighted average interest rate of all existing housing loans was about 4.06%. Based on the current LPR estimate of more than 5 years, the adjusted average interest rate is about 0.5 percentage points lower than 4.06%.
However, this is only an estimated average. Because each borrower's mortgage is issued in different regions and at different times, the decline is also different. In particular, borrowers in Beijing, Shanghai and Shenzhen will be subject to the lower limit of the local interest rate policy for new mortgages.
Knowing that the interest rate of the second home loan will be adjusted again, Ms. Tao, who lives in Changning District, Shanghai, is quite concerned. In the last round of stock mortgage adjustments, her loan interest rate was lowered to 5.25% due to the lower limit of Shanghai's second home loan interest rate policy.
"According to Shanghai's regulations, after this batch adjustment, I can pay less than 900 yuan per month and more than 300,000 yuan in 30 years." Ms. Tao calculated an account for reporters, not only that, but waiting until the repricing date in early February next year, if the LPR with a maturity of more than 5 years falls further before February next year, she can also enjoy the benefits brought by the interest rate cut at that time.
The reporter learned that at present, the lower limit of the interest rate of the newly issued first home loan in Beijing, Shanghai and Shenzhen is lower than the LPR minus 30 basis points, so the interest rate of the first stock mortgage in these three places is also the same as the national adjustment; For example, the interest rate of the second set of existing mortgages within the Fifth Ring Road of Beijing is adjusted to LPR minus 5 basis points, and the interest rate of the second set of existing mortgages outside the Fifth Ring Road is adjusted to LPR minus 25 basis points; The interest rate on the stock of housing loans for second homes in Shenzhen was adjusted to LPR minus 5 basis points.
Pan Gongsheng, governor of the People's Bank of China, previously introduced that the policy will benefit 50 million families and 150 million people, and reduce the total annual household interest expenses by about 150 billion yuan.
Banks take the initiative to make bulk adjustments to provide convenience for borrowers
According to the interest rate self-discipline mechanism, major commercial banks, including the big four banks, will, in principle, issue operational rules no later than October 12 to respond to customer concerns in a timely manner.
The reporter learned from the interest rate self-discipline mechanism that all commercial banks will complete the preliminary preparations such as contract text changes and system transformation as soon as possible to ensure that the relevant work of adjusting the interest rate of existing housing loans is completed as scheduled, and banks are encouraged to provide online channels for "one-click operation" to provide convenience for borrowers.
The relevant person in charge of the People's Bank of China said that the vast majority of borrowers can complete "one-click operation" through online banking, mobile banking and other channels, without going to commercial bank outlets.
The Industrial and Commercial Bank of China, the Agricultural Bank of China, the Bank of China, and the China Construction Bank issued an announcement stating that they would resolutely implement the relevant requirements and promote the reduction of interest rates on existing commercial personal housing loans in an orderly manner in accordance with the law. In terms of timing, the four major banks plan to issue specific operating rules on October 12 to uniformly adjust the interest rates of existing commercial personal housing loans in batches before October 31.
The reporter learned from the relevant departments of ICBC that ICBC will clarify the scope of adjustment, adjustment rules, adjustment methods, time arrangements, service channels, etc., and will release implementation rules and related matters through the official website, WeChat official account, outlets and other channels.
The reporter learned that the borrowers of the existing housing loans that previously adopted fixed interest rates also have a new opportunity to choose this time, and they can negotiate with the bank to issue floating rate loans to replace the stock of fixed-rate loans.
Wen Bin, chief economist of China Minsheng Bank, said that after the batch adjustment is completed, although the decline in the interest rate of the existing housing loan will reduce the interest income of the bank by about 150 billion yuan, the prepayment of the loan will be significantly reduced after the interest rate difference between the new and old housing loans narrows, which is conducive to the bank to stabilize the scale of loans and improve the quality of loans.
Improve the pricing mechanism of mortgage interest rates and agree on a repricing cycle
On the same day, the People's Bank of China issued an announcement to improve the interest rate pricing mechanism for commercial personal housing loans.
The announcement clarifies that from November 1, 2024, when the interest rate deviation between the floating rate commercial personal housing loan and the new commercial personal housing loan issued nationwide reaches a certain range, the borrower can negotiate with the banking financial institution to replace the existing loan with a new floating rate commercial personal housing loan issued by the banking financial institution.
The reporter learned from the People's Bank of China that this may be the last time the bank adjusts the interest rate of the existing housing loan in batches, and in the future, the interest rate of the existing housing loan will be independently negotiated by the bank and the customer based on the principle of marketization, and the dynamic adjustment will be carried out.
The announcement further clarifies the relevant regulations and paves the way for the bank to introduce relevant rules in the future. The People's Bank of China will also publish the national average interest rate of new housing loans on a quarterly basis on its official website for the reference of commercial banks and borrowers.
According to the previous regulations, the minimum repricing period for personal housing loan interest rates is 1 year. This time, the People's Bank of China proposed that from November 1, 2024, if the contract is a floating interest rate, borrowers who meet certain conditions can negotiate with the bank to agree on the markup range and repricing cycle. The reporter learned that the repricing cycle can be yearly, semi-annual, quarterly, etc.
Wen Bin said that in the downward phase of interest rates, the shorter the repricing cycle, the sooner borrowers can enjoy low interest rates; But the sooner borrowers bear high interest rates during the interest rate upswing phase. Borrowers should exercise caution if they wish to adjust the repricing cycle.
Source: Xinhua News Agency
Authors: Wu Yu, Ren Jun, Zheng Juntian
WeChat editor: Guan Qiao
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