experts: lowering the interest rates on existing mortgage loans will effectively curb the tide of early loan repayments and ease the impact on residents' consumption
2024-09-25
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on september 24, pan gongsheng, governor of the people's bank of china, announced at a press conference held by the state council information office that the interest rates on existing mortgage loans would be lowered and the minimum down payment ratio for mortgage loans would be unified.
wang qing, chief macro analyst at orient securities, told guancha.com that due to the high interest rates on existing mortgage loans, the phenomenon of early loan repayments is quite obvious at this stage, which has a significant negative impact on residents' consumption and is an important reason for the slow growth of consumption this year. lowering the interest rates on existing mortgage loans will effectively curb the early loan repayment trend and alleviate its impact on residents' consumption.
central bank: the policy will benefit 150 million people
this morning, pan gongsheng introduced at the state council information office press conference that commercial banks will be guided to reduce the interest rates of existing mortgage loans to the vicinity of the interest rates of newly issued loans, and the average reduction is expected to be about 0.5 percentage points. unify the minimum down payment ratios for mortgages for first and second homes, and reduce the minimum down payment ratio for second home loans at the national level from the current 25% to 15%. increase the support ratio of central bank funds for the 300 billion yuan affordable housing re-loan created by the people's bank of china in may from the original 60% to 100%, and enhance market-oriented incentives for banks and acquisition entities. extend the two policy documents, commercial property loans and "16 financial measures" that are due before the end of the year, to the end of 2026.
at the meeting, pan gongsheng also announced a reduction in the policy interest rate. he explained that the impact of this interest rate adjustment on the net interest margin of banks remained neutral overall. lowering the interest rate on existing mortgage loans will reduce banks' interest income, but will also reduce customers' early repayments. the central bank's reduction in the reserve requirement ratio is equivalent to directly providing banks with low-cost, long-term funding operations. medium-term lending facilities and open market operations are the main ways for the central bank to provide medium- and short-term funds to commercial banks. the decline in interest rates will also reduce banks' funding costs.
foreign media reporters asked, in the case of falling housing prices, do chinese financial regulators think it is time to introduce monetary policy? in this regard, pan gongsheng introduced that in order to implement the central government's decision-making and deployment on promoting the stable and healthy development of the real estate market, the people's bank of china and the financial supervision administration have issued five new real estate financial policies.
the first policy is to guide banks to lower the interest rates of existing mortgage loans. in august last year, the people's bank of china pushed commercial banks to orderly lower the interest rates of existing mortgage loans, and the effect was relatively good. on may 17 this year, after the policy lower limit of the national mortgage interest rate was released, the original mortgage loan was based on the lpr plus or minus points. there was a policy lower limit nationwide. in the new mortgage policy on may 17, this lower limit was cancelled, and the interest rate of newly issued loans was reduced by a larger margin on the basis of the market quoted interest rate. the interest rate level dropped significantly, once again widening the interest rate spread between new and old mortgage loans. especially in large cities such as beijing, shanghai, shenzhen, and guangzhou, the original increase was relatively high. after that adjustment, the interest rate spread between newly issued mortgage loans and the original existing mortgage loans was even larger. in response, the people's bank of china intends to guide banks to make batch adjustments to the interest rates of existing mortgage loans, reducing the interest rates of existing mortgage loans to near the interest rates of newly issued loans, and the average decline is expected to be around 0.5 percentage points.
pan gongsheng pointed out: "banks lowering the interest rates on existing mortgage loans will help further reduce borrowers' mortgage interest expenses. we expect this policy to benefit 50 million households and 150 million people, reducing the total interest expenses of households by about 150 billion yuan per year on average. this will help promote the expansion of consumption and investment, and will also help reduce early loan repayments. at the same time, it can also reduce the space for illegal replacement of existing mortgage loans, protect the legitimate rights and interests of financial consumers, and maintain the stable and healthy development of the real estate market."
pan gongsheng reminded that because there are many borrowers involved, banks also need a certain amount of time to make necessary technical preparations. it is estimated that it is difficult for banks to do this for you immediately, so don't go to the bank this afternoon. in the next step, we will consider guiding commercial banks to improve the pricing mechanism of mortgage loans, and banks and customers will negotiate dynamically based on market principles.
the second policy is to unify the minimum down payment ratio for housing loans to 15%. in order to better support the rigid and diversified housing improvement needs of urban and rural residents, 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%. local governments can formulate policies based on their cities and independently determine whether to adopt differentiated arrangements and determine the minimum down payment ratio limit within their jurisdiction. commercial banks will negotiate with customers to determine the specific down payment ratio level based on their risk status and willingness.
in addition, pan gongsheng introduced that financial institutions will also launch policies such as "extending the deadlines of two real estate financial policy documents", "optimizing the re-lending policy for affordable housing", and "supporting the acquisition of real estate companies' existing land".
at this stage, the phenomenon of early loan repayment is quite obvious, which has suppressed consumption.
regarding the reasons for the reduction in the interest rates of existing mortgages, wang qing, chief macro analyst of dongfang jincheng, told observer.com that according to the central bank's monetary policy implementation report for the fourth quarter of 2023, after the reduction in the interest rates of existing mortgages was launched in september last year, the interest rates of more than 23 trillion yuan of existing first-home mortgages were reduced, and the average interest rate was reduced by 73 basis points to 4.27%, reducing the interest expenses of borrowers by about 170 billion yuan each year. however, affected by the sharp reduction of 20 basis points in the lpr quotation for more than 5 years in february this year and the cancellation of the national mortgage interest rate floor by the "5.17" real estate new policy, the interest rate of newly issued personal housing loans in july this year fell to 3.4%, that is, 87 basis points, or 0.87 percentage points, lower than the previous reduction in the interest rate of the existing first-home mortgage, while other existing mortgage interest rates are higher. in addition, the current yield on residents' investment and financial management is also significantly lower than the interest rate of existing mortgages.
experts believe that lowering the interest rates on existing mortgage loans will help boost consumption.
wang qing said that due to the high interest rates of existing mortgage loans, the phenomenon of early repayment is quite obvious at this stage. the average early repayment rate of rmbs reached 19.3% in june, which is significantly higher than 12.9% in the same period last year. the regional financial operation report released by the central bank in july this year shows that the average monthly early repayment scale from september to december 2023 is 387 billion yuan, corresponding to an annualized early repayment amount of mortgage loans of about 4.6 trillion yuan. this has already had a significant negative impact on residents' consumption and is an important reason for the slow growth of consumption since the beginning of this year.
for banks, the large-scale early repayment of mortgage loans by residents means the loss of high-yield, low-risk, high-quality credit assets, which will seriously erode bank profits, especially in the context of the current "asset shortage" faced by financial institutions. more importantly, the continued large-scale early repayment trend will send a negative signal to the real estate market, which is not conducive to reversing market expectations and promoting the stabilization and recovery of the property market.
wang qing believes that after the central bank announced the reduction of the interest rate on existing mortgage loans, it will effectively curb the tide of early loan repayments and alleviate its impact on residents' consumption. at the same time, this is also sending a positive signal to stabilize the property market, which will help promote the stabilization and recovery of the property market. it should be pointed out that as of the end of june, the scale of existing mortgage loans was 37.8 trillion yuan. a 0.5 percentage point reduction in interest rates means that banks' interest income for one year will be reduced by 189 billion yuan, which is equivalent to about 8.2% of the total profit of the banking industry in 2023.
wang qing said that the pressure can be alleviated by guiding commercial banks to lower deposit rates in an orderly manner. as of the end of june, the balance of commercial bank deposits was 296.5 trillion yuan. this means that if the deposit rate is lowered by an average of 6.4 basis points, it can offset the impact of a 50 basis point reduction in the existing mortgage rate on bank profits. this can reduce the burden on mortgage households while easing the squeeze on bank profits.
wuhan citizen ms. gong is going through the loan settlement procedures for her house. wuhan natural resources and planning bureau website
source: guanchazhe.com
