the decline in existing mortgage interest rates is conducive to improving social welfare
2024-09-29
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(the author of this article, gray, is an assistant professor of quantitative economics at renmin university of china)
on september 24, the central bank announced a series of favorable policies to stimulate the economy. among them, the news that the central bank lowered existing mortgage interest rates for the second time is also the hottest topic of discussion. this time the central bank's policy of lowering existing mortgage interest rates will effectively benefit ordinary households and bring us direct and indirect benefits and impacts.
first, it directly and effectively reduces residents’ mortgage burden.as the mortgage burden is reduced, everyone will have more money in their pockets to improve their lives, which will effectively promote the increase in household consumption. according to information from the central bank on september 24, the current reduction in existing mortgage interest rates is expected to drop by an average of 0.5 percentage points. it is expected to benefit 50 million households with a population of 150 million, and reduce household interest expenses by an average of about 150 billion yuan per year. lowering existing mortgage interest rates will directly reduce household mortgage expenditures, effectively increase household consumption capacity, and inject new vitality into the economy. the increase in ordinary household consumption can not only improve the welfare level of thousands of households, but also be the driving force behind economic growth and household income growth. sustained economic growth and household income growth are the cornerstones of a solid real estate market. therefore, lowering existing mortgage interest rates, a stimulus policy that can effectively benefit ordinary households, will naturally drive the growth of consumption, income, and the economy.
secondly, there will be a significant decrease in the number of home buyers who repay their loans early.by improving the living welfare of families, it effectively promotes overall economic growth. the reduction in early loan repayments is another positive direction for the economy. excessively high mortgage interest rates are a burden on family life and will cause families to use their disposable funds to repay mortgages in advance, thereby reducing family consumption and investment willingness. with interest rates on existing mortgages falling, everyone will have more liquidity to better improve their lives and promote consumption.
the third point is to effectively reduce the risk of bank repayment in advance.prepayment of loans is a very big risk for banks, and banks have specialized departments to control the risk of prepayment of loans. lowering the interest rates on existing mortgages reduces the number of households that repay their loans in advance, thus ensuring the sustainable cash flow of commercial banks. with fewer people repaying their loans in advance, banks will have more sustainable cash flow and more funds in the future to better implement real estate-related policies to benefit the people, further stabilize our real estate market and improve people's lives. quality.
the fourth point is that reducing residents’ debt pressure is good news for the overall real estate market.according to the data released by the central bank yesterday, the total number of existing housing loans benefited by this wave of existing housing loan interest rate policies is around 30 trillion, involving most of the existing housing loans. if a family's mortgage burden is too high, mortgage defaults will occur, resulting in foreclosure. based on past experience, mortgage defaults and foreclosures are highly contagious and will affect the overall stability of the real estate market.
at the same time as the central bank's policy of lowering existing mortgage interest rates, commercial banks also need to make some preparations in advance to cooperate with the central bank's policies that benefit the people. in the final analysis, interest on existing mortgage loans is an important source of income for banks in the short term. lowering the bank's existing mortgage interest rate will narrow the interest difference between bank loans and deposits, which means reducing the bank's short-term income. at the same time, the bank's stimulus policies this time also include: reducing the down payment ratio for home purchases and other stimulus policies. while these stimulus policies bring us convenience in buying houses, they will also further increase the leverage of mortgage loans and bring challenges to the risk management of bank mortgage loans.
under the central bank's new round of quantitative easing policies involving real estate, commercial banks should also cooperate with and make good use of these policies to strengthen their risk management capabilities for housing loans. for example, the existing financial big data artificial intelligence model can effectively guarantee the soundness of each mortgage loan, which is a powerful means for banks to strengthen their ability to control mortgage risk risks, so that policies can better serve thousands of households.
this article represents the views of the author only.
