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on september 24, the central bank launched a powerful "combination punch", and the property market received a policy "booster".

central bank governor pan gongsheng announced a number of major policies at a press conference held by the state council information office, involving lowering the reserve requirement ratio, reducing interest rates on existing mortgage loans and unifying the minimum down payment ratio for mortgages.

the amount of information is very large! specifically:

1、reserve cut:the deposit reserve ratio will be lowered by 0.5 percentage points, providing about 1 trillion yuan of long-term liquidity to the financial market

2、rate cuts:lower the central bank's policy interest rate, and reduce the 7-day reverse repurchase rate by 0.2 percentage points from the current 1.7% to 1.5%, guiding the loan market quotation rate and deposit rate to decline simultaneously

regarding real estate, the central bank plans to work with the financial supervision bureaufive real estate financial policies were issued：

1. guide banks to lower the interest rates of existing mortgage loans, with an average drop of about 0.5 percentage points

2. reduce the down payment ratio for second homes, and unify the minimum down payment ratio for mortgage loans to 15% at the national level

3. optimize the refinancing policy for affordable housing, and increase the central bank's funding support ratio from 60% to 100%

4. extend the deadlines of the two real estate finance policies, namely, commercial property loans and the “16 financial measures”, to the end of 2026

5. support the acquisition of real estate companies’ stock of land to ease their financial pressure (policy is still under study)

overall, the central bank has provided strong financial policy support to the real estate sector, which has injected a "booster" into stabilizing market confidence. specifically for the real estate industry, it will directly have an impact on many aspects.

regarding the interest rate cut, the central bank stated it this way: lower the central bank's policy interest rate, and reduce the 7-day reverse repurchase operation rate by 0.2 percentage points, from the current 1.7% to 1.5%, guiding the loan market benchmark rate and deposit rate to decline simultaneously, and maintaining the stability of the commercial bank's net interest margin.

in june this year, the central bank made it clear that the 7-day reverse repurchase operation rate has basically assumed the function of the policy rate, and the interest rates of other monetary policy tools can dilute the color of the policy rate. this means that the lpr quotation benchmark has been changed from the 1-year mlf to the 7-day omo.

based on this, the 0.2 percentage point reduction in the 7-day reverse repurchase operation rate, which serves as the interest rate anchor, will soon be reflected in the next round of lpr quotes.

it is expected that the lpr quotation will be lowered as early as october 21, which will drive the central mortgage interest rate to move further downward.

in addition, the central bank announced that it will lower the deposit reserve ratio by 0.5 percentage points in the near future to provide about 1 trillion yuan of long-term liquidity to the financial market; it may further lower the deposit reserve ratio by 0.25-0.5 percentage points this year depending on the market liquidity situation.

this cut in the reserve requirement ratio will effectively supplement medium- and long-term liquidity and reduce banks' liability costs. both residents' mortgages and real estate financing will benefit from it.

the second reduction in existing mortgage interest rates, which the market has long called for, has finally come to fruition.

the central bank said it would guide commercial banks to lower the interest rates on existing mortgage loans to near the interest rates on new loans. the average expected drop in the interest rates on existing mortgage loans is 0.5 percentage points.it is expected to benefit 50 million households and 150 million people, and reduce household interest expenses by about 150 billion yuan on average each year.

the most important thing about lowering the interest rates on existing mortgage loans is that it can not only reduce the mortgage pressure on residents, but also unleash consumer vitality, expand consumption, provide impetus for economic growth, reduce the phenomenon of early loan repayments, and maintain financial order stability.

in september last year, the reduction in interest rates on existing mortgage loans was basically completed, with interest rates on more than 22 trillion yuan of existing mortgage loans reduced. the adjusted weighted average interest rate was 4.27%, with an average decrease of 73 basis points, reducing borrowers' interest expenses by 160 billion to 170 billion yuan each year.

since the beginning of this year, as the interest rate spread between existing and incremental mortgage loans has continued to widen, the current average interest rate for existing mortgage loans is about 4%, while the interest rates for new mortgages are generally 3.2% for the first mortgage (as low as 2.9% in some cities) and 3.5% for the second mortgage. the market has once again called for a rate cut for existing mortgages, and the phenomenon of residents repaying their loans in advance still exists. as of the end of the second quarter, the total balance of personal housing loans of the six major state-owned banks had a net decrease of about 325.5 billion yuan compared with the beginning of the year.

the impact of the reduction in existing mortgage interest rates on real estate itself is not a direct stimulus, it is more of a medium- to long-term impact, which will reduce the mortgage pressure on residents and avoid large-scale early loan repayments, thus helping to stabilize the property market.

commercial personal housing loans at the national level will no longer distinguish between first and second homes, and the minimum down payment ratio will be unified at 15%. on this basis, local governments will formulate policies based on their own conditions, and each bank will determine the ratio through consultation with customers.

the minimum down payment ratio for the second home is equalized to that for the first home, which has a certain positive effect on stimulating the release of demand for improvement home purchases, especially for some home buyers with relatively tight cash turnover, it can reduce the initial financial burden.

will core cities follow suit? judging from the adjustment of the lower limit of down payment ratio in various cities under the "517 new policy", the minimum down payment ratio for the first home was reduced from 20% to 15%, and the minimum down payment ratio for the second home was reduced from 30% to 25%. at present, the lower limit of the down payment ratio policy in most cities has reached the national bottom line. this time, the down payment ratio for the second home is reduced by another 10 percentage points. in the future, the down payment ratio for the second home in most cities across the country will soon be adjusted and reduced to the lower limit of 15%.the down payment ratio in a few core cities such as beijing, shanghai and shenzhen is also expected to be moderately reduced.

but,we should not have too high expectations on the effect of the policy to reduce the minimum down payment ratio for second homesfor most home buyers, the down payment ratio is no longer the most important reference factor in home buying decisions. future income stability and expectations of house price increases and decreases are the decisive factors.

the previously established 300 billion yuan affordable housing refinancing policy will be optimized.the central bank's funding support ratio has been increased from 60% to 100%., and enhance market-oriented incentives for banks and acquisition entities.

according to the original model, local state-owned enterprises purchase completed but unsold commercial housing for use as allocated or rented affordable housing. according to the "lend first, borrow later" and quarterly disbursement model, financial institutions first lend to eligible borrowers, and then apply to the people's bank of china for corresponding re-lending funds at the beginning of the next quarter. the central bank re-loans 60% of the principal of loans already issued by financial institutions, and the remaining 40% of the loan principal and risks need to be borne by the commercial banks themselves.

now, the central bank will provide full financial support, which reduces the funding costs and lending risks of commercial banks, helps to increase the enthusiasm of commercial banks for loan issuance, and thus speeds up the progress of local state-owned enterprises' stockpiling.

the people's bank of china and the state administration of financial supervision have issued two phased policies, namely the 16 financial policies and commercial property loans. the validity period of the two policies will be extended from december 31, 2024 to december 31, 2026.

at this point, the “16 financial measures” issued in 2011 have been postponed for the second time.

there are two main aspects of impact. one is related toexisting loan extension, existing loans due before december 31, 2026 may be allowed to be extended for one year beyond the original regulations; on the other hand,insurance housing supporting financing, the supporting financing issued to special loan support projects on december 31, 2026 will not be downgraded in risk classification during the loan period; the borrowing entities after the separation of new and old debts will be managed in accordance with qualified borrowing entities, and if the newly issued supporting financing becomes non-performing, the relevant institutions and personnel can be exempted from liability if they have performed their duties diligently.

also,the commercial property loan support policy will also be extended for two yearsfor real estate development enterprises with standardized operations and good development prospects, national commercial banks may continue to issue operating property loans to repay the existing real estate-related loans and open market bonds of the enterprise and its group holding companies (including consolidated subsidiaries) on the basis of controllable risks and commercial sustainability.

the extension of the “16 financial measures” will help guide financial institutions to provide sustained and stable financial support to real estate developers, alleviating the financial pressure on real estate companies. it will also better help achieve the goal of ensuring the delivery of buildings and promote the stable development of the real estate market.

the policy of extending support for commercial property loans will help high-quality real estate companies to mobilize their existing assets, improve liquidity through commercial property loans, and ease debt repayment pressure.

overall, the central bank has provided ample support in terms of total amount of funds and prices, provided strong financial support for promoting the stable and healthy development of the real estate market, and boosted market confidence.

the current stimulus and restoration of housing market demand, whether homebuyers increase leverage for investment and consumption,essentially, it still depends on the buyer's own expectations of the cost and benefits of buying a house., full employment of residents and improvement of income levels are the core support for market stabilization.

therefore,in addition to monetary policy support, fiscal policy also needs to be coordinated to create investment, consumption and employment, so that monetary policy can find its "focus", thereby promoting the stable and healthy development of the real estate market.