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in recent days, shanghai white-collar worker zhang jing (pseudonym) has been on a roller coaster ride. a bloomberg report indicated that china is considering lowering the interest rates on existing mortgage loans, but chinese regulators have not responded. last friday (august 30), the real estate industry (shenwan) index rose by nearly 5%, leading the a-share market.

zhang jing calculated the mortgage he owed and found that if the mortgage interest rate dropped from 4.55% last year to 3.4% today, it would mean he could pay 2,000 yuan less a month. for him, who had just started a family, this was a considerable expense.

this week, bloomberg further detailed the news: financial regulators have proposed to cut existing mortgage rates by a total of about 80 basis points, with the first cut coming in the next few weeks and the second cut at the beginning of next year, applicable to both first and second homes.

zhang jing sent the message to a wechat group called "interest rate cut pursuers," which he formed last year. the group includes more than 400 neighborhood neighbors. everyone excitedly discussed the matter, refreshing hundreds of messages within half an hour, hoping that the interest rate cut can be smoothly implemented.

long wait: the borrower negotiated with the bank many times but to no avail

in march 2023, the newlywed zhang jing bought a new house in shanghai as a wedding house. because it was his first house, he enjoyed a 35% down payment ratio and paid more than 2 million yuan in down payment. in addition, he took out a commercial loan plus a provident fund loan of 4 million yuan with a loan term of 30 years. at that time, the loan interest rate he applied for was 4.55%, which means that the total repayment amount reached 7-8 million yuan, with a monthly repayment of 21,000 yuan.

like many small families, zhang jing and his wife clearly divided the work. he was responsible for paying the mortgage, and his wife's income was used to cover household expenses. in the past few years, his industry was relatively prosperous, and he was optimistic about future income and career development. when signing the loan contract, he did not hesitate too much.

before buying the house, he and his wife were food lovers, eating out four or five times a week, spending 100 to 200 yuan per person each time. after buying the house, they never eat out and cook at home on weekends. this saves 3,000 yuan per month.

he did the math and found that if the mortgage interest rate dropped from 4.5% to 3.5%, it would mean he could pay less than 2,000 yuan in mortgage payments each month.

"more than 2,000 yuan is a huge sum of money. at least i don't have to live frugally and i can go out for dinner occasionally to relax," he told titanium media app.

however, the environment is changing. since 2024, his company has experienced layoffs, with the layoff rate reaching 50%. although he was not laid off, his salary was significantly reduced.

the pressure of life made him very hesitant about having children. at the age of over 30, he is already a late marriage and late childbearing person, but he lamented, "if i want to have a child now, the financial pressure will be even greater."

the recent news of a reduction in interest rates on existing loans caught his attention. reuters, nomura securities, ubs and other institutions all reported related news. he once thought that the pressure could be relieved a little, but then bank executives came out to refute the rumor and denied this prediction, which made him feel worried again.

in fact, zhang jing has dealt with banks and developers many times over the past year. in march last year, the shanghai housing market was still hot, and a lottery was required to buy a new house. he went through a series of processes including signing contracts, selecting houses, signing contracts, and applying for loans. in july last year, banks began to lend money, and the topping-out time for the community buildings was the end of september. according to regulations, banks need to lend money after the topping-out of the development project is completed. if banks lend money in advance, it also means that owners have to pay a few more months of interest.

at that time, several real estate projects in shanghai also issued loans in advance, and the relevant developers also negotiated with the owners for compensation. zhang jing and his neighbors believed that the bank's lending before the roof was completed was illegal, and hoped that the bank would compensate for the interest on the early repayment of the loan.

also in july last year, the director of the monetary policy department of the people's bank of china stated at a press conference that in accordance with the principles of marketization and rule of law, commercial banks are supported and encouraged to independently negotiate with borrowers to change contractual agreements, or to issue new loans to replace the original existing loans.

the attitude of the people’s bank of china encouraged zhang jing and his neighbors, and they submitted relevant materials to the shanghai banking and insurance regulatory bureau, but they were all rejected.

in august, the people's bank of china and the financial regulatory commission clarified that eligible existing first-home mortgage borrowers can negotiate with the lending financial institutions to lower the interest rate. in december, the people's bank of china authorized the national interbank funding center to announce that the loan market benchmark rate (lpr) on december 20, 2023 will be: 3.45% for one-year lpr and 4.2% for lprs over five years.

this also excited him and his neighbors, and they all communicated with the banks, hoping to lower their loan interest rates, but many banks said that it was not applicable to shanghai and there was no room for reduction.

this is a long wait, but zhang jing and others have not given up yet.

stay away from consumerism and repay your loan in advance, but you can’t repay it whenever you want.

some people are tightening their belts and paying off their loans early while waiting for mortgage rates to fall.

rather than lowering interest rates, xiao ma is more concerned about when he can pay off his mortgage in advance.

will the interest rate cut really happen? how much can it be reduced? how will different banks follow up? there are invisible obstacles for banks to implement it... after careful consideration, she continued to save money.

his company has also been cutting salaries this year, and the pressure on her to repay the loan has increased.

"consumption has declined significantly now. it may also be because people are getting older and have become indifferent. they don't want to pay a premium at all." she told titanium media app.

my colleagues have also downgraded their consumption and no longer compete with each other for luxury goods. after all, in this environment, there is nothing worth showing off.

in the first half of this year, she made an early loan repayment, and in her opinion, the process was very complicated. "you can't just repay a loan whenever you want. you need to make an appointment, and there are limits on the amount you can repay."

one of her colleagues bought a school district house a few years ago, and immediately sold it after her child entered school. the next buyer paid the full amount, which her colleague used to repay the loan in advance. the amount of funds was more than 1 million, and she waited in line for more than a month before she could pay it back.

"as long as the interest rate does not drop to a level that makes me comfortable, i will choose to repay the loan in advance," said xiao ma.

on august 31 last year, the people's bank of china and the financial regulatory bureau jointly issued the "notice on reducing the interest rate of existing first home loans" to guide the reduction of the interest rate of existing first home loans. according to brokerage research reports, after the guidance of the reduction, the phenomenon of early repayment has eased. according to the "regional financial operation report" of the central bank, the amount of early repayments of personal housing loans nationwide reached 432.45 billion yuan in august 2023. from september to december after the policy was introduced, the average monthly early repayment amount of mortgage loans fell to about 387 billion yuan, a decrease of 10.5% from august. in regions where the interest rate reduction was larger, such as hubei, henan and jiangxi, the amount of early repayments fell by 42.1%, 27.5% and 22.2%, respectively, which was higher than the national average.

in regions where the interest rates on existing mortgage loans have been lowered by a large margin, residents' consumption demand has improved relatively and the recovery of consumption propensity has been more obvious.

in the fourth quarter of 2023, the consumption propensity of urban residents nationwide was 3.7 percentage points lower than the same period in 2019. among the regions with more interest rate cuts, hubei and jiangxi were 2.4 percentage points and 1.3 percentage points lower than the same period in 2019, respectively. this means that the two regions with the largest reduction in the interest rate of existing mortgage loans have recovered their consumption propensity relatively faster. after the scale of early loan repayment by residents in these regions decreased, part of the saved funds was converted into consumption.

huaxi securitiesthe research report estimates: assuming that 10-20% of the early loan repayment amount is used for consumption, it will boost my country's consumption by about 0.9-1.9% and gdp by about 0.37-0.74%.

however, the threshold for early loan repayment is gradually increasing.

recently, a bank in guangzhou has also increased the repayment limit for apps to 50,000 yuan. according to screenshots of the page released by some users, the icbc app system shows that "if you choose to make a partial payment when making an appointment for repayment, the amount you enter must be greater than 50,000 yuan."

according to media reports,icbcthis adjustment was launched at the end of august. users who apply for early loan repayment online need to pay more than 50,000 yuan. if the amount of early loan repayment is less than 50,000 yuan, the borrower needs to go to an offline outlet to go through the early loan repayment procedures.

in addition, icbc mortgage users revealed that they recently made appointments through the app to repay their mortgages in advance, but the earliest they could choose to repay was december 1, which means that users will have to wait nearly three months.

"banks don't want to adjust for profit, but they may have to adjust in the end for profit."

in the group of “interest rate cut seekers”, zhang jing’s neighbor posted a screenshot of a chat with a banker, which roughly said: the recent news is not a rumor, and the bank has received relevant requests.

bankers are also paying attention to the developments.

regarding bloomberg's rumors, china merchants bank president wang liang said that this will have a certain negative impact on the banking industry's existing mortgage rates, and the macro-management department will conduct sufficient demonstration and research before introducing such a policy.

lao li, who has worked in a bank in a second-tier city for ten years, told titanium media app: regulators and banks may be in a stalemate at the moment. banks do not want to lower their rates for the sake of profit, but may eventually be forced to do so for the sake of profit.

what are the feasible implementation methods? lao li discussed with his friends in the banking industry: the interest rates of existing loans involve too many people. if we negotiate with each bank one by one, it will be a huge project and not very realistic. it is more feasible for banks to make a one-size-fits-all approach, like in 2008. banks can directly unify operations at the system level, send text messages or call to borrowers, or set several gears on the bank app for users to choose. this is a more efficient and feasible way. if people need to negotiate, each person will have a different reduction point, which is difficult to promote in actual operation.

the year 2008 mentioned by lao li was a special period. it took more than four months from the issuance of the document by the central bank to the full implementation of the preferential interest rate plans for existing mortgage loans by various banks.

at that time, the us subprime mortgage crisis swept the world, and china also faced the situation of export obstruction, foreign capital outflow and shrinking market. the economy turned from overheating in 2007 to freezing point.

domestic housing prices fluctuated violently. in the first three quarters of 2008, real estate transaction volume in shenzhen, beijing, wuhan and other places fell by 50%. in may 2008, shenzhen's housing prices fell by 36% from the peak of the previous year.

in the second half of 2008, the real estate sector introduced a combination of stimulus policies, including five interest rate cuts, tax cuts, and loan interest rate discounts. specifically, the interest rate discount for new personal mortgage loans was reduced from 15% to 30%. a few months later, under the game of all parties, the existing mortgage loans also reached a 30% discount in early 2009.

in order to attract new users, banks have quickly implemented a 30% discount on interest rates for new personal mortgages. however, as for the 30% discount on interest rates for existing mortgages, there are many disagreements among banks. wait-and-see, plan extensions, changes of mind, and raising of thresholds in disguise are all common behaviors.

banks are also competing with each other.

according to reports, in january 2009, some small and medium-sized banks took the lead.bank of beijing、bank of nanjing、china minsheng bankthe 30% discount on existing mortgage rates was officially implemented on january 1. some state-owned banks have announced to follow suit, but some large state-owned banks have also changed their plans, making it difficult to implement.

at the end of 2008 and the beginning of 2009, some large banks set complicated conditions for the preferential interest rate business for existing mortgage loans. if the homebuyer's application was unsuccessful, he or she would transfer the mortgage to other banks. some new lending banks would help the customer find a guarantee agency to repay the principal and interest of the original lending bank, and then apply for a loan at the new lending bank, with the interest rate as low as 30% off.

this directly led to the recovery of the real estate market. in 2010, the real estate market was overheated, and the policy shifted to regulation, ending the 30% discount on personal housing loan interest rates.

"now some banks issue one-year preferential interest rate coupons to high-quality customers, which means that without changing the contract, users are given appropriate interest rate discounts, and dynamic evaluations are conducted every year. if the economic situation improves, the issuance of coupons will be stopped. if the overall environment deteriorates, more coupons will be issued. this is also an exploration by the bank," said lao li.

so, which type of customers are high-quality customers? if they are high-quality customers, why can't they repay their loans? this again leads to the issue of fairness.

tianfeng securitiesanalysts believe that, considering the latest mortgage policies and interest rate changes this year, there is a real possibility of further lowering the interest rates on existing mortgages, and they have given two calculation methods.

first, according to the previous stock mortgage interest rate of 4.27% announced by the central bank, it can be compressed to the weighted average interest rate of new housing loans in the second quarter of this year at 3.45%, which can be compressed by 82bp, corresponding to a reduction of borrowers' interest expenses by about 310 billion yuan each year.

another calculation method is based on the 2024 interim report of bank of communications. the annualized average yield of existing medium- and long-term personal loans in the first half of 2024 was about 4.0%, which dropped to the weighted average interest rate of new mortgage loans at 3.45%, a compression of about 55bp, corresponding to a reduction of about 210 billion yuan in interest expenses for borrowers each year.

"from the perspective of market expectations, although lowering the interest rates on existing mortgages will indeed benefit the people, the average amount per household is relatively limited. it is difficult to drive effective demand from the household sector due to the decline in interest rates on existing mortgages. what's more, a reduction in the existing stock does not mean an increase, and the impact on the increase in real estate demand is also expected to be limited." said the above person.