The mortgage interest rate has changed from the reference benchmark interest rate to the reference LPR, but the final loan interest rate level has remained basically stable.
Editor’s note: This article is from: Zhongxin Jingwei, author: Wei Wei, authorized reprint
How to adjust the personal housing loan interest rate after the LPR reform? This topic has always been the focus of the market. On August 25th, the central bank’s website published “People’s Bank of China Announcement [2019] No. 16” (hereinafter referred to as “Announcement”). The most important change is the benchmark for personal housing loan interest rate, which was previously the benchmark interest rate for loans. The pricing benchmark becomes LPR.
The announcement pointed out that the interest rate of newly issued commercial personal housing loans was formed by adding the interest rate of the loan market at the corresponding period of the most recent month. The interest rate of the first commercial personal housing loan shall not be lower than the interest rate of the corresponding term loan market, and the interest rate of the second set of commercial personal housing loans shall not be lower than the corresponding period loan market price plus 60 basis points.
The industry believes that this adjustment reflects the policy orientation of “staying and not speculating” and strict and strict policy. Future mortgage interest rates will more prominently reflect regional and bank credit strategies. The difference in mortgage rates between different regions, different customers and different periods will be greater.
Personal home loan pricing benchmark becomes LPR
“The purpose of this adjustment is to closely link with the LPR quotation mechanism, while highlighting the industry characteristics and policy orientation of the housing loan. The first home business loan should not be lower than the pricing benchmark, and the second house business loan should not be lower than the pricing standard by 60 basis points. It embodies the policy of ‘staying and not speculating’ and tightening policy. Zhou Xuejun, senior economist at the Institute of International Finance of the Bank of China, told the client of Zhongxin Jingwei.
The chief researcher of New Network Bank and the special researcher of the National Financial and Development Laboratory Dong Xizhen believe that the most important change in this adjustment is the change in the pricing benchmark for personal housing loans. Prior to this adjustment, the benchmark for personal housing loans was based on the benchmark interest rate, which is the rate at which the benchmark interest rate would rise or fall, to determine the personal housing loan interest rate. After the adjustment, the pricing benchmark for personal housing loans is the price-to-price ratio (LPR) of the goods, which is based on the LPR. The interest rate of a home loan is determined according to the LPR. This is the basis of this adjustment.
When it comes to the impact on households, the relevant person in charge of the central bank said that after the conversion of the pricing benchmark, the interest rate of the first set of personal housing loans issued nationwide should not be lower than the corresponding period LPR (according to August 20, 5 years). The LPR of the above period is 4.85%); the interest rate of the second set of personal housing loans shall not be lower than the corresponding period LPR plus 60 basis points (calculated as 5.45% according to the LPR of 5 years or more on August 20), and the current personal housing loan in ChinaThe minimum interest rate is basically the same. Compared with before the reform, households apply for personal housing loans, and interest expenses are basically unaffected.
Experts: Mortgage interest rate levels will remain stable
Dong Xiwei analyzed the client of Zhongxin Jingwei. According to the loan interest rate of 5 years or more, the original benchmark interest rate was 4.9%, and the LPR of 5 years and above announced on August 20 was 4.85%. If the first home loan is not added, it is 5 basis points lower than the benchmark interest rate, but the possibility of adding points is high; the second home loan plus 60 basis points is 5.45% (4.85% + 0.6), which is about 11% higher than the benchmark interest rate.
Dong Xiwei emphasized that this is the minimum requirement for national unification, and the adjusted personal housing loan interest rate may be higher than the minimum standard announced by the central bank.
The central bank’s announcement pointed out that the central bank’s provincial branches will determine the minimum interest rate for the first and second sets of individual housing loans in accordance with the changes in the local real estate market in accordance with the “city policy” principle. In addition, the banking financial institutions should determine the commercial personal housing loan interest rate pricing rules based on factors such as the operating conditions, customer risk status and credit conditions of the provincial market interest rate pricing self-regulatory mechanism, and determine each pen. The specific value of the loan.
Zhong Hongwei, director of research and policy consulting, believes that the new policy will take effect from the LPR announced on September 20. If the LPR goes down, it depends on whether the value of the plus point rises. It is temporarily impossible to judge whether the mortgage interest rate will fall as the LPR declines.
Zhongda Real Estate Principal Analyst Zhang Dawei said that according to the current mortgage data, most banks implemented a 10-20% increase in the first home loan benchmark and a 20-30% increase in the second home loan. For the current market, the policy will not lead to higher interest rates.
Zhang Dawei said that for the current real estate loan market, the interest rate of the first home loan is too high, and the interest rate difference between the first suites in different cities in China is huge. The lowest Shanghai has only 5% discount, and most of the implementation interest rates are above 5.39%. Look, there is a possibility of reduction in the follow-up.
“According to the criteria for the first home loan in most cities in China, the first-home loan is definitely a need for no loans. The future policy should target a stable interest rate for this group.” Zhang Dawei believes.
In addition, the announcement also stated that when borrowers apply for commercial personal housing loans, they can negotiate interest rate repricing cycles with banking financial institutions.
Zhou Jingwei pointed out that the repricing cycle is a minimum of one year, which is consistent with previous policies, but the re-pricing is based on the current market quotation rate. Future mortgage interest rates will more prominently reflect regional, monetary policy and credit strategies of banks. The difference in mortgage rates between different regions, different customers and different periods will be greater.
On August 20, at the policy briefing held by the State Council Information Office, Liu Guoqiang, deputy governor of the People’s Bank of China, made it clear that the mortgage interest rate wasThe reference benchmark interest rate becomes the reference LPR, but the final loan interest rate level should remain basically stable.