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As the LPR (loan market benchmark rate) for terms of more than five years fell by 10 basis points, mortgage rates also continued to decline.

On July 23, China Business News learned that the first mortgage interest rate of a foreign bank in Guangzhou is expected to drop to the "2-digit" range. "Although it has not been officially implemented yet, it is under discussion and is very promising," a bank official told China Business News.

In fact, since July, Guangzhou's banking industry has lowered the interest rates on first-home mortgages twice in a row, and currently has three ranges of 3%~3.05%, 3.1%~3.15%, and 3.3%. These are not only lower than other first-tier cities, but even lower than some second- and third-tier cities.

In addition to Guangzhou, there are reports that mortgage interest rates in many cities have entered the "2 era".

The "2 era" is here!

On May 17, 2024, a "package" of real estate policies was implemented, canceling the national floor policy for first and second home mortgage rates, and giving local governments the power to regulate the floor policy for mortgage rates. Subsequently, most cities canceled the floor policy for first and second home mortgage rates, and mortgage rates continued to fall.

On July 22, the LPR for loans with a term of more than 5 years was lowered for the second time this year, and accordingly, the mortgage interest rate continued to decline. Taking a commercial loan with a total amount of 1 million yuan, a repayment period of 30 years, and an equal principal and interest repayment method as an example, after two interest rate cuts this year, the monthly payment of home buyers will be reduced by about 202.1 yuan, and the total loan repayment will be reduced by about 73,000 yuan in 30 years.

At present, the mainstream mortgage interest rate for the first home in the country is around "LPR-75BP", which is 3.2%. After this LPR reduction, the mainstream mortgage interest rate will drop to 3.1%, the lowest level in history, and it is only one step away from the "2 era".

Regarding the simultaneous reduction of mortgage interest rates, a person from a large state-owned bank told China Business News that the bank reasonably determines the interest rate level of personal housing loans based on the borrower's credit status, repayment ability, etc., and implements differentiated loan pricing on the premise of meeting regulatory requirements. In addition, he reminded that after the LPR is lowered, the interest rates of existing mortgage customers will not be reduced immediately, and the mortgage interest rates will be adjusted after the interest rate reset date agreed upon in the contract between the home buyer and the bank.

It is understood that the interest rates for first-home mortgages in first-tier cities such as Beijing, Shanghai, and Shenzhen have been lowered to 3.4%, while the interest rates for first-home mortgages in Hangzhou and other places have dropped to 3.15%.

In Guangzhou, in mid-July, the large state-owned banks took the lead in lowering the first home loan rate from 3.4% to 3.2%, while the first home loan rate of joint-stock banks has reached 3.15%, and foreign banks have even dropped to 3%.

After the LPR was lowered by 10 basis points, the first mortgage rate of state-owned banks has dropped to 3.1%, and some joint-stock banks and city commercial banks have lowered it to 3.05%. However, at the same time, some joint-stock banks and city commercial banks have maintained their first mortgage rates at 3.3%, thus forming three gears.

It is expected to form a policy combination punch

In fact, not only Guangzhou, but also Foshan, Nanjing and other places have reported mortgage interest rates in the "2000s".

According to media reports, in Nanjing, the lowest first-home mortgage rate of the six major state-owned banks is 3.05%, and the lowest second-home mortgage rate has also dropped to 3.05%. The lowest second-home mortgage rate of some banks will drop to 2.95%.

In addition, a mortgage manager at a HSBC branch in Foshan said that the bank's commercial loan interest rate for the first home is "LPR-95BP". According to the latest LPR, the lowest mortgage interest rate is 2.9%.

At present, the interest rate for the first personal housing provident fund loan of more than 5 years is 2.85%, and the commercial loan interest rate and provident fund loan interest rate are very close.

"In the future, there is still room for mortgage interest rates to fall. There is no lowest, only lower." Li Yujia, chief researcher of the Guangdong Housing Policy Research Center, told Caixin.

Li Yujia believes that, on the one hand, the volume of residential transactions across the country is shrinking. Taking the online signing volume of first-hand houses in Guangzhou as an example, in 2016, at its peak, the online signing area of ​​first-hand houses in Guangzhou exceeded 14 million square meters, 8 million square meters last year, and 3.4 million square meters in the first half of this year. "The decline is still very large"; on the other hand, with "too many monks and too little porridge", the banking industry faces greater competitive pressure in the mortgage business, and can only lower mortgage interest rates to attract customers.

Recently, the full text of the "Decision of the Central Committee of the Communist Party of China on Further Comprehensively Deepening Reforms and Promoting Chinese-style Modernization" (hereinafter referred to as the "Decision") was announced, which proposed "fully empowering city governments with the autonomy to regulate the real estate market, adopting policies based on the conditions of each city, and allowing relevant cities to cancel or reduce housing purchase restrictions and cancel standards for ordinary and non-ordinary residential properties." etc.

Fang Peng, an analyst at Guojin Securities, believes that the interest rate cut is the first step in the implementation of real estate market policies, which sends a positive signal. It is expected that the subsequent policies such as destocking and optimizing increments will be implemented and physical volume will be formed as soon as possible. With the joint efforts of credit relaxation, local demand-side policies based on cities, and destocking, it is expected that a policy combination will be formed to help the market in high-energy cities gradually recover and stabilize.

How likely is it that existing mortgage loans will be reduced again?

While the incremental mortgage rate was being reduced, discussions on further reducing the surcharge on existing mortgage loans were gradually heating up.

In August last year, the People's Bank of China and the State Financial Supervision and Administration Bureau officially issued the "Notice on Matters Concerning Reducing the Interest Rates on Existing First Home Loans", and a nationwide reduction in the interest rates on existing home loans began.

On November 6 last year, the Monetary Policy Department of the People's Bank of China issued a document stating that the interest rates of more than 22 trillion yuan of existing mortgage loans were lowered, with an average decrease of 0.73 percentage points, benefiting more than 50 million households and 150 million people, reducing borrowers' interest expenses by 160 billion to 170 billion yuan each year, and an average annual reduction of 3,200 yuan per household.

So, is there a possibility that the current mortgage rate will be reduced for the second time?

Fang Peng believes that as the interest rates of newly issued mortgages continue to decline, the difference between the current new mortgage interest rates and the previous existing mortgage interest rates is gradually widening, and the interest rates of existing mortgages may be lowered in the future.

Yan Yuejin, research director of the E-House Research Institute, also said that the large gap between new mortgage rates and existing mortgage rates may put the work of lowering existing mortgage rates on the agenda in the second half of the year.

Xue Hongyan, deputy director of Xingtu Financial Research Institute, told China Business News that according to data from the central bank, the interest rates of existing mortgage loans that were reduced last year saved home buyers about 6.7% of the total net profit of commercial banks in 2023. Considering that the current interest rate spread in the banking industry is at a low level and there have been two interest rate cuts this year, unless there is another large-scale early repayment wave, it is unlikely that the central bank will again guide commercial banks to reduce the interest rates of existing mortgage loans.