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lowering the interest rates on existing mortgages is just the first step

2024-09-25

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ever since the federal reserve cut interest rates for the first time a few days ago, netizens have been speculating when domestic interest rates will be cut.

in fact, people didn’t have to wait too long. just yesterday, the long-awaited policy of interest rate and reserve requirement ratio cuts was finally implemented.

simply put, the central bank will lower the reserve requirement ratio by 0.5 percentage points in the near future, which is expected to release approximately 1 trillion yuan of liquidity.

as for the issue of existing mortgage loans, which has been a hot topic recently and was widely discussed in a short article by bloomberg, the official has given a clear answer that it will guide major commercial banks to reduce the interest rates on existing mortgage loans to around the interest rates on newly issued mortgages, with an average reduction of around 0.5%.

the current average interest rate for existing mortgage loans is about 4%. if it drops by 50 basis points, it will be 3.5%, which is indeed almost the same as the 3.45% interest rate for new mortgage loans.

for banks, this is a way of benefiting the people, but for the stingy people it is undoubtedly a waste of money, which is really not easy.

if you have paid attention to some developments in banks this year, you will find more bizarre situations. for example, in terms of mortgage loans, banks have become more and more humane.

in the past, going to the bank to apply for a mortgage was a long-term battle for many people.

the down payment cannot be low, the interest rate can go up at any time, a lot of documents need to be printed, the approval process is complicated and it takes 10 trips to get it done, and the waiting time for the loan is a long one.

banks are also very tough when it comes to loan repayment, especially when it comes to defaulting on payments.

at the beginning, it was just a warning. when the time went on for several months or even half a year, the legal process was directly followed, either by judicial auction or by packaging the bonds and handing them over to a company that specializes in disposing of non-performing assets.

when house prices rise, no matter how the bank handles it, it is basically a sure profit. it doesn't matter whether you are laid off or your business fails.

however, when housing prices entered a phase of volatile downward movement, the situation took a sharp turn. for example, in terms of the way banks dealt with mortgage defaults, they changed from being decisive in the past to a more flexible "cold treatment".

different plans are given according to the borrower's financial situation. if the borrower is unable to repay the loan for a short period of time, the repayment can be suspended, or only the interest can be paid, with the term ranging from half a year to one year.

in order to help their customers tide over the difficult times, some banks will even temporarily act as intermediaries and introduce them to jobs, such as working as security guards in banks, or as waiters in shopping malls and restaurants, or working in factories, etc. in short, it allows people to breathe a sigh of relief, and as long as they don't stop paying their mortgages, everything will be fine.

the reason why banks have put down their airs and become so easy to talk to is ultimately due to the overall environment.

there is a very obvious trend now: more and more people are paying off their loans early or stopping payments.

in fact, since the beginning of the year, many cities have cancelled the lower limit of the first home loan interest rate and lowered the down payment ratio of home loans and the provident fund loan interest rate.

however, the interest rate of existing mortgage loans is too eye-catching. it cannot be compared with the deposit rate that has fallen below 20,000. unexpectedly, the gap with the interest rate of newly issued loans is also widening. although others have repeatedly set new lows, the interest rate of existing mortgage loans is still as high as over 4%.

homebuyers who bought in during the peak period felt uncomfortable when they saw that their interest rates were lower than those of those who bought in later, so they chose to get off the market early and wait and see what happened next.

those who can repay their loans in advance are all financially strong, while many are unable to repay their loans and are forced to stop paying.

relevant data shows that in the first half of this year, among the 42 listed banks, the non-performing loan ratios of 19 banks increased to varying degrees. chongqing bank, which had the largest increase, saw its non-performing loan ratio increase by 0.31% compared with the beginning of the year.

generally speaking, when mortgage payments are suspended, the property will go through a judicial auction process, but the data for this part does not look good either.

take the judicial auction data in august for example.

although the number of judicial auction houses listed in august reached more than 81,000, a record high, the transaction volume was less than 20 billion yuan; from january to august, the number of judicial auction houses listed exceeded 430,000, and the transaction rate was only 23.29%, 12 percentage points lower than the same period last year.

the banks are panicking, so it is expected that they will become more approachable. instead of putting borrowers on the blacklist, which will do nothing as the house will still rot in their hands and the banks will bear the losses, it is better to give borrowers a break and encourage them so that at least some interest can be recovered.

the fact is that despite many efforts in policy and on the part of banks, the increasingly fierce wave of mortgage defaults cannot be stopped.

because everyone is having difficulties. in 2024, the hardships of ordinary people are about to overflow the surface, and we are tired of writing about them.

in the past two years, the real estate, catering, education and training, tourism and it industries have all suffered severe blows. these major industries involve the employment of over tens of millions of people.

under such circumstances, workers work hard while watching their wages decline structurally, or simply face the cost reduction and efficiency increase of enterprises and get laid off midway; graduates leave the novice village and officially step into the social millstone to face the real test of survival; self-employed individuals and small and medium-sized enterprises cannot survive the special period and close down one after another...

everyone has their own difficulties.

it would be even more painful if you still have the halo of being a mortgage holder.

they were late to get on the train, and not only missed the real estate dividend, but also stepped on the high housing prices. coupled with the wave of layoffs and bankruptcies brought about by the downward economic environment, the nearly 30-year mortgage has become a mountain that is suffocating them.

especially for the former middle class, the difficulty has increased exponentially.

with an annual salary of hundreds of thousands, over a million in savings, living in a mansion, and a happy family, he was definitely a winner in life. but under the dimensionality reduction attack of economic laws, he suffered the most brutal blow.

it is said that every time an economic crisis comes, there will be a major class reshuffle. as a result, it is discovered that the top class is not affected, the middle class falls to the bottom class, and the bottom class is still the bottom class. polarization is inevitably intensified.

it would be better if you are good at business and housekeeping. even if you lose your job and career, you can at least get the capital to retire ten or twenty years earlier than ordinary workers by virtue of your hard work in the early stage.

the most worrying thing is the group of people who are deeply trapped in the three deadly traps and cannot extricate themselves. on the one hand, they have a mortgage of more than 10 million yuan and their children are attending international schools, and on the other hand, their income has plummeted.

even if one lowers the standard of living to the subsistence level, the seemingly endless mortgage debt still makes one despair.

under the pressure of mortgage loans, most people work hard for a month and still only have enough money to pay this month's housing share. to maintain daily expenses, they can only start with advance consumption, using the credit limit of one card to cover the bill of that card, robbing peter to pay paul, with a very low tolerance rate, and mainly resort to extreme operations.

if you are not careful, a credit card explosion can lead to a large-scale explosion of personal debt.

according to the latest data, nearly 800 million people in the country are burdened with debt, with an overdue rate of 42% and 8 million people subject to execution, a considerable number of whom are people born in the 1980s and 1990s.

this group had once become the breadwinners of the family, but due to debt problems, they have never recovered.

if there is anything worse than mortgage loans and online loans, it is debt plus unfinished buildings. due to a series of real estate defaults, many people only have mortgage loans but no houses.

even if the house you bought is unfinished, you still have to continue to repay the mortgage. however, when the pressure of the mortgage exceeds the limit of survival, you can no longer continue to pay it.

people are aware that defaulting on payments will incur high penalty interest, and if the bank appeals and loses the case, they will have to bear the litigation costs and attorney fees.

even worse, defaulting on payments will cause a stain on one's personal credit and put one on a blacklist. restrictions on high consumption are not a big deal, but the main thing is that once you are put on the list of deadbeats, your future in this life will basically be bleak.

but for those struggling to survive, the future is secondary.

this is the most difficult part to solve. it can be said that real estate has completely become the wealth of a few people, but the debt of the majority.

at this time, lowering interest rates and reserve requirements can indeed play a certain role.

weak domestic demand is the biggest obstacle to economic development. however, due to the long-term dollar tide, the country has little room to loosen its monetary policy even if it wants to.

however, the united states could not withstand the pressure after all. it had no time to boost the economy of the east and had to cut interest rates to survive and get through the election first.

as a result, there is room for interest rate cuts in the country.

the benefit of lowering the interest rates on existing mortgage loans is, first of all, to help reduce the burden on ordinary people and help them lower their mortgage costs.

taking a commercial loan with a total amount of 1 million yuan and a loan period of 30 years as an example, based on the equal principal and interest repayment method, the monthly interest expenditure can be reduced by 312 yuan, which is more than 110,000 yuan in 30 years.

saving a little on the interest on a large mortgage is a profit, and it will help alleviate the phenomena of "early mortgage repayment" and "large-scale default".

from this perspective, lowering the interest rates on existing mortgage loans is actually not a bad thing for banks.

although the interest rate spread has decreased, the probability of bad debts will also decrease accordingly. only when the tide of default and early loan repayment has subsided can banks achieve real profits. they all understand the principle of sustainable development.

in addition, the liquidity released by the interest rate cut will promote consumption to a certain extent, especially stabilizing the downturn in the real estate market.

however, to truly restore people's consumer confidence, we cannot put all our eggs in one basket by lowering interest rates, even if it is a conventional means of "loosening the money supply", such as reducing the purchase tax on passenger cars, providing low-interest loans to enterprises and self-employed individuals, or encouraging residents to take out mortgages, consumer loans, car loans, and so on.

it cannot be said that this type of stimulus is useless. it is just that in the phase of economic downturn, coupled with the advent of the era of national debt, the debt repayment capacity of the general public has been infinitely weakened. even if banks give more loans and can leverage greater leverage, no one dares to blindly take on debt.

to truly boost people's confidence in consumption, the key is to give everyone money.

some experts have expressed the opinion that the country's rmb deposits have increased by 26 trillion yuan, which is excess savings and there is still no money.

"if we just use one-third of that money to buy houses and renovate them, won't china's economy be able to recover smoothly?"

the reality is that 900 million people have a monthly income of less than 2,000 yuan, which is barely enough to cover their living expenses. how can they spend their money?

in fact, there has always been a mainstream opinion on the internet regarding stimulating consumption, which is to give money and living allowances to the people and let them decide how to use them.

if you are worried that distributing money will not be effective, then distribute "real" consumer vouchers. don't use the 100-20 or 150-30 tricks. directly subsidize 50% to 70%, for example, 100-60 or 200-150.

after all, the biggest problem at present is not inflation like in the united states, but the collapse of domestic demand and economic shrinkage. there is an urgent need to open up sales channels for unsalable products so that money can truly flow and become active money.

of course, whether issuing money or coupons, it is definitely not enough in the long run. if we want to truly improve domestic demand, we still have to fight a hard battle. lowering the interest rate on existing mortgage loans is just the first step.