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At 9:46 on November 5, 2019, the central bank came up with an unexpected operation: suddenly announced a rate cut. The interest rate has been lowered from 3.3% to 3.25%! This is the first time the central bank has lowered the 1-year MLF rate since April 2018. The impact on the property market is huge. The following webmasters will give you an in-depth interpretation.

MLF interest rate drops by 5 basis points to 3.25%

On November 5, 2019, the central bank carried out a medium-term loan facility (MLF) operation of 400 billion yuan, with a term of one year, and the winning bid rate was 3.25%, down 5 basis points from the previous period (previously 3.3%). Today, 403.5 billion yuan of medium-term loan facility (MLF) expires, which is the third large-scale MLF expiration amount during the year. The market has generally believed that the central bank has a lower chance of lowering the MLF interest rate, and this time the benchmark interest rate was lowered by 5 basis points, which made the market unexpected.

Maybe, Xiaobai can’t understand what it means. The webmaster first learns what MLF is, and then deeply interprets the impact of the policy.

MLF’s full term medium-term lending facility, created by the central bank in 2014, is a monetary policy tool for the central bank to provide medium-term base currency, with the main purpose of supplementing the base currency. To put it simply, the money that the mother borrows money from the financial institution, the larger the scale of the operation, the larger the amount of the loan, and the smaller the interest rate of the MLF operation. The lower the interest rate of the borrowing between the central bank and the commercial bank, the lower the borrowing cost of the real economy through the currency transmission mechanism between the central bank and the commercial bank-enterprise and residents.

Open interest rate drop space

Since August 17th, the central bank announced that LPR (LoanPrime Rate) is linked to MLF interest rate, the new LPR = MLF interest rate + bank comprehensive cost (capital cost, operating cost). MLF will be adjusted, and the probability of LPR will be lowered. In fact, it is well understood that it is primary school arithmetic.

As the policy officially falls today, the “road map” for interest rate cuts has gradually become clear. On the 20th of each month, the mother will announce the new LPR. From the current situation, the probability of interest rate will be lowered.The short-term loan interest rate of the industry banks should be reduced, which will help to further reduce the actual financing costs of enterprises.

But the small decline of 5 basis points will not have too much impact on the property market. The property market situation in each city is not a slight change in interest, and the high-inventory, risk-hazard cities are in accordance with the current The downward pressure on the situation will continue. For the sake of understanding, the webmaster takes Xiamen as an example.

The Xiamen Housing Mortgage Rate before the New Deal on October 8:

First set: The benchmark is 5% up 5.14%, and the second set is 15% up 5.635% (baseline 4.9%).

The Xiamen mortgage rate after the New Deal on October 8:

First set: LPR+30 base point is 5.15%.

Two sets: LPR+80 base point is 5.65%. (On October 21, the LPR of 5 years and above was 4.85%).

With a pure commercial mortgage of 1 million yuan, the equivalent principal and interest repayment method is adopted. The loan term is 30 years. The monthly contribution of the first home loan before and after the New Deal increased by 3.08 yuan. If it is the second home loan, the monthly contribution increased by 9.48. yuan.

After the central bank cut interest rates, the industry’s estimated LPR price on November 20 will drop by at least 10 points, or 4.75%. It is expected that at the same time, Xiamen will continue to maintain the first set plus 30 basis points and two sets plus 80 basis points. At that time, the Xiamen mortgage loan interest rate will usher in the downward adjustment of the interest rate exchange anchor, and will be lower than 10.8 before the New Deal:

First set: LPR+30 base point is 5.05%.

Two sets: LPR+80 base point is 5.55%.

According to this estimated interest rate, the net commercial loan of 1 million yuan, the equivalent principal and interest repayment method, the loan term is 30 years, when the first home loan monthly contribution is reduced by about 58 yuan compared with the New Deal, the second home loan month The contribution is reduced by about 54 yuan, which is also the money for a small restaurant. But note that this is a conservative estimate, and the future will not rule out multiple interest rate cuts.

It is a big advantage for real estate companies, because the bond financing of many real estate companies will expire at the end of the year. This policy can issue corporate bond financing and possible local debts in advance, creating a reasonable and abundant liquidity environment, making corporate financing difficult.

It is also good for ordinary buyers, because lowering the MLF interest rate is only the beginning, and it is possible to continue to lower the mortgage interest rate and save a lot of money in the future. There are several reasons for this:

Reason for interest rate reduction

The webmaster discovered the law of Yang Ma. Before the release of LPR quotes on the 20th of each month, the central bank will conduct MLF operations with great probability to create the first conditions for guiding LPR down. For example, last month, Yang Ma launched a new MLF before the 20th.

And from the major first- and second-tier cities in the country, the current interest rate level is slightly different from the second quarter of 2019, but more than 80% of the cities are still maintained in the past two years.The lowest interest rate. At present, the mortgage interest rates of all cities have not risen compared to the fourth quarter of 2018.

The reason for the interest rate cut by the mother, from the outside, is affected by the deterioration of the global trade environment and a series of risk events, the global manufacturing industry has been significantly weakened. Since 2019, most of the world’s major developed markets and emerging economies have adopted monetary easing policies. Such as Australia, New Zealand central bank. On October 31, 2019, the Fed announced that it would implement a third rate cut, down 25 basis points, and the federal funds rate target range was lowered to 1.50%-1.75%. The central banks of the world’s major economies have cut interest rates and restarted loose monetary policy, providing space for China’s central bank to cut interest rates.

And the Fed cut interest rates again in October, while the domestic CPI is higher, driving bond yields up. The Sino-US spread is already at a high level since 2016, and there is a risk of deviating from the fundamentals. At this time, a small adjustment of the MLF interest rate is conducive to guiding market expectations, and it can avoid overshooting the Sino-US spread and affect the RMB exchange rate.

From the inside, the domestic economy is under downward pressure. Since September, inflation has remained at a high level, and many commodity prices have risen, trade frictions have eased, interest rate cuts have fallen short, and so on. The bond interest rate has undergone a significant upward adjustment process, directly pushing up the direct financing costs of enterprises.

The National Bureau of Statistics released data showing that domestic first-quarter GDP growth was 6.4%, second-quarter growth was 6.2%, and third-quarter growth was 6.0%. The growth rate of industrial production, investment and consumption slowed down, and the labor market sentiment declined. In September, the PPI (production price index) slowed down to -1.2% year-on-year, and the latest PMI data also continued the downward trend.

In the near future, pork continues to rise. If we continue to let the market speculate inflation, and form a tighter currency forecast, it will undoubtedly be very unfavorable to lower the financing cost of the real economy, and it is not conducive to the implementation of local debt early release measures.

At present, the property market is relatively deserted, but the warming is the trend. Many regions have relaxed the use of provident fund and the name of “introducing talents” to promote the property market. From the above data, part of the difficulty in macroeconomic operation is the lack of demand, and the expansion of aggregate demand needs to stimulate credit demand. The rate cut has reached a very necessary moment.

In this context, the central bank lowered the MLF interest rate and released the signal of stabilizing market expectations. In addition to market expectations and reasonableness, MLF interest rate cuts also responded to the State Council’s request to reduce corporate financing costs.

It’s like a timely rain, it’s “just right” and “just right”. Monetary easing is to ease the downward pressure on the economy, indicating that the central bank continues to adhere to a stable monetary policy, stabilize and expand domestic demand, and ensure that market liquidity is reasonably abundant, so that the economy will run smoothly in the fourth quarter of this year. In particular, the problem of high pork prices can be largely alleviated.

However, it is not possible to reduce the interest rate as a new round of currency easing and release.The overture of water! Because the decline of 5 basis points is not large, indicating that in the context of structural structural pressures, the monetary authorities will be more cautious about the adjustment of interest rates and rhythm, and will not be “difficult to flood.”

But it does not mean that the property market can be fired, because real estate is no longer a means of stimulating the economy in the short term. Moreover, the first set of new mortgage interest rates should not be lower than LPR, and the second suite should not be lower than LPR + 60 basis points. The interest on buying multiple suites can be much higher. At present, but the trend, real estate loan costs are unlikely to rise, sideways and a slight downward adjustment will be the mainstream.

How is the decline in LPR?

As for the future decline in LPR, it is not expected to be too high. It is expected that the downward adjustment of the MLF interest rate of 5 BP will drive the LPR interest rate to fall by 5-10 basis points in the overall quotation in November. Among them, it is expected that the one-year LPR interest rate in November may be quoted at 4.10%-4.15% (4.20% in October), helping to reduce the financing costs of entities, and also to some extent to hedge the actual financing brought about by the recent PPI. The pressure of higher interest rates.

In combination with the current property market, downward pressure still exists, and the overall rate of property market reduction is reduced. The reduction in MLF is good news for the real estate market. Because from the overall point of view, it is also a reassurance for the buyers to be good. After all, in the context of a reduction in the cost of loans to the whole society, this time the reduction is only the beginning, and the follow-up market will be loose for the first home loan interest rate.

For those who just want to buy a home, this is definitely good news. This means that the next mortgage rate will be more and more friendly for the first set. It is not particularly anxious but it is recommended to buy it later in the year. A high probability can save a lot of money. Because of the approaching end of the year, the recent loan lending rate is slower, and many lending periods are delayed until after New Year’s Day. However, after the year, bank funds are sufficient and lending is easier. For those who are interested in buying, you can look at a few real estate options first, and wait until next year.

There is a policy to buy a house, and interest rates are one of the most critical but policies. From the current point of view, it is still the pre-adjustment and fine-tuning, the camera choice, “stable economy” is the real policy bottom line. In a word, China’s property market for 20 years, after bottoming out in 2019, will enter a new era from 2020!