news

한어Русский языкEnglishFrançaisIndonesianSanskrit日本語DeutschPortuguêsΕλληνικάespañolItalianoSuomalainenLatina

as the interest rates on newly issued personal housing loans continue to decline, the interest rate spread between new and old mortgages has widened, and calls for a new round of reductions in existing mortgage rates have re-emerged.

specific measures such as renegotiating mortgage interest rates within the same bank, transferring housing mortgage loans across banks and re-signing mortgage contracts have also aroused wider discussion. securities times and china securities journal reporters learned in interviews that the interest rate spread between existing and newly issued loans is not a simple fair and reasonable measurement, but also requires comprehensive consideration of residents' liability costs, commercial banks' operability, and the sustainable ability of finance to support the real economy.

the popularity of early loan repayment remains high

"there are only zero and many times to repay the mortgage early", "do it yourself, repaying the mortgage early can save hundreds of thousands!!" "the last countdown to early repayment..." since the beginning of this year, the popularity of sharing about "early repayment of mortgages" on social platforms has not diminished. in addition, multiple quantitative data also point to the continued phenomenon of residents repaying their mortgages early.

the latest interim performance reports of listed banks have all been released. judging from the structure of various loans, the balance of personal housing loans of most banks decreased in the first half of the year. taking the four major banks as an example, as of the end of the first half of this year, the balance of personal housing loans of china construction bank, industrial and commercial bank of china, agricultural bank of china, and bank of china was 6.31 trillion yuan, 6.17 trillion yuan, 5.07 trillion yuan, and 4.75 trillion yuan, respectively, which decreased by 76.466 billion yuan, 123.092 billion yuan, 100.668 billion yuan, and 33.611 billion yuan compared with the end of last year.

among the joint-stock banks, the personal housing loan balances of china merchants bank, industrial bank and citic bank all exceeded one trillion yuan by the end of the first half of the year. from a year-on-year perspective, the personal housing loan balances of china merchants bank and industrial bank decreased by 10.047 billion yuan and 10.741 billion yuan respectively compared with the end of last year, while that of citic bank increased by 18.637 billion yuan.

according to the statistical report on the loan allocation of financial institutions released by the people's bank of china, in terms of total amount, the balance of personal housing loans decreased by 380 billion yuan in the first half of this year.

current analysis generally believes that the decline in the balance of personal housing loans is due to two reasons: first, the decline in commercial housing sales and the subsequent weakening of credit demand; second, customers repay their loans ahead of schedule, causing the balance to further reduce.

a research report released by guotai junan's macroeconomic research team in july pointed out that the early repayment rate of residents in june returned to 23.4%, down 13.6 percentage points from the historical high of 37% in april. this means that the intensity of early repayment by residents has slowed down, showing a seasonal decline. however, compared with the same period in history, the current early repayment rate of residents is still at a high level.

in an earlier research report, the macroeconomic research team of guotai junan securities stated that the early repayment rate of residents was calculated based on the rmbs conditional early repayment rate index compilation method released by the national interbank depository and clearing corporation. the so-called rmbs, or personal housing mortgage-backed securities, is a securitization product with personal housing mortgage loans as the underlying assets. early repayment means "early repayment."

zhang yu, assistant director and chief macro analyst of huachuang securities research institute, once pointed out that the early repayment rate index refers to "the proportion of the amount of early repayment of debts by the debtor to the outstanding principal balance of the asset pool in personal housing mortgage loans". therefore, it is a good indicator to observe the early repayment behavior of residents' personal housing loans. according to china money network, the rmbs conditional early repayment rate index has stopped updating, and the latest data is as of october 24, 2023.

where does the huge interest rate gap come from?

early repayment of mortgages is not a new phenomenon. according to china money network, the rmbs early repayment rate index has been fluctuating upward since the beginning of 2023. wang yifeng, chief analyst of the financial industry at everbright securities, pointed out that early repayment behavior of residents is affected by many factors such as the macroeconomic environment, the soundness of residents' balance sheets, and mortgage loan pricing. the early repayment rate is related to housing sales, financial management yields, the availability and price of alternative debt resources, and residents' actual income and income expectations.

in order to better adapt to the new situation of major changes in the supply and demand relationship in my country's real estate market and meet the common demands of borrowers and banks for orderly adjustment and optimization of assets and liabilities, the people's bank of china, together with the state administration of financial supervision, issued the "notice on matters concerning reducing the interest rates of existing first home loans" in august last year, which clearly stated that eligible existing first home borrowers can negotiate with the lending financial institutions to lower the interest rate.

in the "china regional financial operation report (2024)" released by the people's bank of china in july this year, the remarkable results of the policy of reducing the interest rates of existing mortgage loans were introduced in a special topic. the report pointed out that since the implementation of the policy, the interest rates of more than 23 trillion yuan of existing mortgage loans have been reduced, with an average reduction of 0.73 percentage points, reducing the interest expenses of borrowers by about 170 billion yuan each year, which has played a significant role in reducing early repayments and stimulating consumption growth.

however, for some time, the interest rate gap between newly issued personal housing loans and existing personal housing loans has widened, thereby increasing the early repayment rate of residents.

luo zhiheng, chief economist of guangdong securities, pointed out recently that the "notice" requires that the adjusted interest rate cannot be lower than the lower limit of the first home loan interest rate policy in the city where the original loan was issued, which has led to some existing mortgage interest rates remaining at a high level.

at the same time, after the "may 17 new policy", the interest rate of newly issued personal housing loans across the country continued to decline. the latest data from the people's bank of china showed that the interest rate of newly issued personal housing loans in july 2024 was 3.4%, 9 basis points lower than the previous month and 68 basis points lower than the same period last year, at a historical low.

so, how big is the interest rate gap between new and old loans?

taking beijing as an example, the lower limit of the interest rate for existing first-home mortgages from october 2019 to december 2023 is "lpr+55 basis points". then, the interest rate for existing first-home mortgages, which has been repriced on january 1 this year, is 4.75% (the lpr quotation for 5-year and above on december 20, 2023 is 4.2%), and the interest rate difference with the interest rate of newly issued personal housing loans in july (3.4%) is 135 basis points. however, except for beijing, the lower limit of the interest rate for existing first-home mortgages in other cities is mostly lpr or "lpr-20" basis points. therefore, the interest rate difference between existing and newly issued mortgages is less than 135 basis points.

how to adjust the interest rate on existing mortgage loans?

the interest rate gap between new and old personal housing loans has widened, and calls for lowering the interest rates on existing mortgages have re-emerged.

the current discussion on the reduction of existing mortgage interest rates mainly revolves around the banking side, including existing housing mortgage loan customers renegotiating mortgage interest rates with banks; existing housing mortgage loans are directly transferred to other banks and mortgage contracts are re-signed, etc.

in an interview with reporters, pang ming, chief economist and head of research at jll greater china, said that in the process of promoting a steady and orderly reduction in interest rates on existing mortgage loans, it is necessary to carefully and meticulously compare and choose policies between repricing by the original bank and switching to mortgages.

he believes that the mortgage transfer method of directly transferring existing mortgage loans to other banks and re-signing mortgage contracts may cause disorderly market competition, further lower mortgage interest rates and profit levels, and there is controversy over whether the mortgage transfer scope covers second mortgage loans in addition to first mortgage loans.

in contrast, under the premise of marketization and rule of law, it is more stable and easy to operate to promote the downward trend of existing mortgage interest rates through equal consultation and independent negotiation between the borrower and the original lending bank, and to change the contract agreement to adjust the spread or issue loans with lower mortgage interest rates to replace the original existing loans.

this is also the direction of current commercial banks' innovation attempts. the reporter learned that some banks have launched corresponding products, and customers apply for them. after review, the bank will lower the interest rate of existing mortgage loans. bank insiders told reporters that such products currently do not make other special requirements for customers. at the same time, although such products exist, they will not be actively promoted publicly. from public information, some banks have also innovatively launched new mortgage products such as existing mortgage interest rate coupons, "balloon loans", and "easy supply".

the financial regulatory authorities have not commented on the banks' existing innovations in mortgage products.

previously, the shenzhen financial regulatory bureau issued a consumer reminder stating that some banking institutions have launched new mortgage products such as "balloon loans" and "easy payment", plus common mortgage combinations such as "equal installments of principal and interest" and "equal installments of principal", to provide consumers with more flexible housing mortgage repayment methods.

the shenzhen financial regulatory bureau pointed out that different products have their own advantages and disadvantages. when choosing a product, consumers can make a comprehensive decision based on the product features, their own financial situation, and their repayment ability. at the same time, different repayment methods generate different amounts of interest. consumers can calculate and compare the interest costs of various products and choose the best one.

long-term considerations require a balance of multiple factors

liu xiaochun, deputy director of the shanghai new finance research institute, once pointed out that housing mortgage loans are a type of ultra-long-term loan. they will experience multiple fluctuations in market interest rates during the entire loan period, which creates great uncertainty for both borrowers and lenders. therefore, the rationality of the interest rate is particularly important.

"if we now require banks to uniformly lower loan interest rates within the loan period, we will face the question of what standard to use for the reduction." liu xiaochun believes that if the reduction standard is non-market-based and fixed in a new contract form, there may be greater distortion in the future, which is not only contrary to the direction of interest rate marketization reform, but also buries risks. therefore, it is necessary to innovate the interest rate floating mechanism to solve the current contradictions and stabilize the real estate market, and in the long run, it can straighten out the distorted market interest rates and ensure the healthy development of the real estate market.

pang ming also pointed out that commercial banks should conduct accurate assessments of borrowers' existing mortgage interest rates, mortgage principal size, asset quality, credit records, risk levels, repayment capabilities, and whether the home is their first purchase, whether they live in the home, and the size of the home. they should clarify the standards, conditions, and scope of interest rate adjustments, implement differentiated pricing, differentiated mortgage strategies, and dynamically adjust risk controls, and do relevant supporting work in the pre-loan investigation and post-loan tracking stages.

in addition, the balance of benefits after adjusting the interest rates of existing mortgage loans also needs further consideration.

on the one hand, lowering the interest rates on existing mortgages can save homebuyers money on interest. pang ming said that according to estimates, if the interest rates on existing mortgages are lowered by 75 to 100 basis points, for a 30-year mortgage loan of 1 million yuan with equal principal and interest repayments, the borrower's monthly payment can be reduced by 400 to 600 yuan, saving about 5% to 7% of the monthly payment and total repayment amount, and the total interest expenditure of homebuyers is expected to be reduced by 160 billion to 220 billion yuan.

on the other hand, banks are still under pressure to maintain sustainable operations. the aforementioned bank insider told reporters that although existing mortgage customers are now allowed to lower their interest rates, the pressure to repay mortgages early has not been significantly reduced.

in a research report, lin yingqi's team at cicc pointed out that assuming that the interest rates on existing mortgage loans are adjusted synchronously with bank liability costs, the overall impact on bank interest spreads is expected to be neutral.

the report pointed out that even if the existing mortgage rates are not adjusted, residents may still put pressure on bank interest margins by paying off loans early and replacing them with business and consumer loans. whether the interest margin can stabilize depends on whether residents can improve their credit demand by reducing debt repayment pressure. in addition, the policy orientation of supporting the real economy is also crucial to the fundamentals of banks.