"Currently, we are repaying according to the LPR (Loan Prime Rate), and this time the reduction in the stock housing loan interest rate can just lower by 0.3 percentage points," Xiao Ai (pseudonym) told the reporter, "This time the monthly payment can be reduced from 7335.26 yuan to 7075.02 yuan, with interest savings of nearly 100,000 yuan."
Recently, over a hundred banks have officially announced the details of the reduction in stock housing loan interest rates. Since the signal of the reduction was released at the end of September, both the volume of housing transactions and the volume of new housing loan business of banks have seen a significant increase, setting a new record for the year. At the same time, both regulators and banks have shown their intentions to improve the pricing mechanism for individual housing loan interest rates.
Experts and bank insiders interviewed said that the adjustment of stock housing loan interest rates in the future will be normalized. In the medium and long term, the adjustment of stock business will help stabilize the bank's housing loan business, promote the recovery of the real estate market and the economy, and overall, it will be beneficial to the improvement of the profit outlook.
Over a hundred banks have issued details
Recently, several banks including the Industrial and Commercial Bank of China, the Agricultural Bank of China, the Bank of China, and the China Construction Bank have successively issued announcements that from October 25th, they will carry out batch adjustments to the interest rates of stock individual housing loans. In addition to the six major state-owned banks and joint-stock banks, private banks, foreign banks, and small and medium banks from various places have also quickly followed suit. Each bank has announced a specific operation plan to implement batch adjustments to eligible stock housing loans before the end of October.
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The reporter from the International Finance News noticed that as of October 15th, more than a hundred banks have issued details of the reduction in stock housing loan interest rates. It is reported that this adjustment of stock housing loan interest rates does not involve changes in the LPR, but is achieved through the addition and subtraction of points. Except for the different adjustment standards for second and above stock housing loans in Beijing, Shanghai, and Shenzhen, the rest of the eligible stock housing loans will be automatically batch-adjusted to the interest rate level of LPR minus 30 basis points by the bank system.
The news of the reduction in stock housing loan interest rates is like a strong stimulant to the market.
Xiao Wang (pseudonym) works at a chain real estate agency in Shanghai, and he told the reporter that the current daily business volume of the store is about 1.5 times that of before. Relevant data shows that on October 13th, the number of second-hand housing online signings in Shanghai reached 1334 sets, setting a new high for a single day this year.
Rising in tandem with the volume of housing transactions is the volume of new housing loan business of banks. The reporter learned from a bank customer manager that since the news of the reduction in stock housing loan interest rates was released, the increase in housing loan business in his branch has been significant, with customer inquiries about mortgages and mortgage acceptance volumes both increasing compared to before, and customer managers can handle an average of about 5 signings per week recently.
Another major bank's housing loan business personnel told the reporter that recently, the work schedule is often "three shifts", and the signing center lights up until one or two o'clock in the morning on weekends. "Recently, when the business volume is high, it can double compared to usual," he further explained, "In the past year, the policy points have been dense, and the situation of housing loan business is complex and diverse. There will also be some problems encountered in the business, and the determination of some complex situations is not very clear. It is said that there will be more details issued for individual cases on November 1st."Overall, the central bank's swift implementation of a reduction in the interest rates on existing housing loans, with the policy's pace of implementation and the market interest rate pricing self-discipline mechanism requiring commercial banks to act quickly, will accelerate the adjustment of existing housing loan interest rates and have a more positive effect on stabilizing market expectations. Chen Wenjing, Director of Policy Research at the China Index Academy, stated this in an interview.
Li Yujia, Chief Researcher at the Housing Policy Research Center of Guangdong Urban Planning Institute, believes that choosing to adjust the interest rates on existing housing loans at this time will have a significant stimulating effect on consumption in the fourth quarter and will greatly assist in achieving the annual economic growth target.
Pricing Long-Term Mechanism for Housing Loan Interest Rates
In August 2023, the first round of adjustments to the interest rates on existing housing loans took place, with many homebuyers who had purchased at high interest rates benefiting from the rate concessions, including Xiao Ai. Before the adjustment, his annual housing loan interest rate was 6.15%. After this round of adjustments, his annual housing loan interest rate will have been reduced by a total of 2.25 percentage points, resulting in a reduction of 742,800 yuan in total interest.
The good news is that in this round of adjustments, regulatory authorities and several banks have indicated their intention to establish a long-term mechanism for pricing personal housing loan interest rates.
Previously, when addressing reporters' questions about improving the pricing mechanism for commercial personal housing loans, a responsible person from the central bank pointed out that the term of housing loan contracts is generally long, and a fixed margin cannot reflect changes in factors such as borrowers' credit and market supply and demand. Once market conditions change, it can easily lead to an expansion of the interest rate gap between new and old housing loans. With the continuous deepening of interest rate marketization reform, it is necessary to optimize the institutional design to promote commercial banks and borrowers to change contracts in an appropriate manner.
"The reduction of existing housing loan interest rates may become a regular occurrence in the future," said the aforementioned major bank's customer manager in an interview. "However, there are currently no specific implementation details issued."
"Looking at the content of the central bank's Announcement No. 11 of [2024], starting from November 1, 2024, as long as there is a significant difference between the interest rates on existing and new housing loans, borrowers can negotiate with banks to adjust the margin at any time. In addition, the restriction that the minimum mortgage interest rate repricing cycle is one year is lifted, which can help keep the interest rate gap within a reasonable range and also alleviate the monthly payment pressure and early repayment phenomenon for homebuyers," Li Yujia analyzed and pointed out.
However, the reporter noticed that there is still a significant call for early loan repayments on the internet. Bankers say that although there has been no significant increase in the phenomenon of early loan repayments recently, the number is still considerable. "The current overall income and housing price expectations are still not optimistic, and there is a lack of better investment channels. Secondly, the intensity of this round of existing adjustments is also smaller compared to the previous ones. These may be the main considerations for consumers to decide on early loan repayments," Li Yujia said.
For a long time, housing loans have been a high-quality business for banks, providing a significant source of performance. What impact will this adjustment of existing housing loan interest rates have on banks?Zhou Maohua, a macro researcher at the financial market department of China Everbright Bank, pointed out that lowering the interest rates on existing mortgages will exert certain pressure on the net interest margins of some banks in the short term, but it is generally controllable. The central bank's measures such as reserve requirement ratio cuts and interest rate reductions can help lower the banks' liability costs and support banks in repricing deposit rates.
"Generally speaking, the impact of adjusting the interest rates on existing mortgages on the operating performance of banks mainly depends on the proportion of this business in specific banking institutions. If some institutions have a high proportion of existing mortgage business in their assets, the adjustment of mortgage interest rates will have a relatively greater impact on net interest margins and profits in the short term. However, it should also be considered comprehensively that lowering the interest rates on existing housing will reduce the situation of early mortgage repayments and customer attrition," Zhou Maohua analyzed, "In the medium and long term, this measure is conducive to stabilizing the mortgage business of banks, promoting the recovery of the real estate market and the economy, and is beneficial to the improvement of the overall profit outlook."