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when will existing mortgage interest rates be lowered? how to implement the transfer of existing housing loans to mortgages across banks?in response to the new round of housing finance policies that have recently triggered heated discussions among the market and home buyers, reporters from the "daily economic news" visited banking institutions in many places as home buyers and discussed in depth with industry insiders what impact the remortgage business will have on banks and home buyers. influence.

"do you want an official answer?" the person in charge of a personal loan center of a major bank told reporters with a smile that too many customers have come to consult recently. the existing mortgage loan is related to the "money bag" of every family and is also closely related to the operation and development of the bank.

banks in many places responded to the "cutting of existing mortgage interest rates": still need to wait for the release of specific details

on september 24, pan gongsheng, governor of the central bank, stated at a press conference of the state council information office that existing mortgage interest rates will be lowered, the minimum down payment ratio for mortgage loans will be unified, and commercial banks will be guided to reduce existing mortgage interest rates to close to the new mortgage interest rates. pan gongsheng introduced at the press conference that the central bank plans to guide banks to make batch adjustments to existing mortgage interest rates, and the average decrease is expected to be about 0.5 percentage points. it is expected that this policy will benefit 50 million households and 150 million people, reducing household interest expenses by an average of about 150 billion yuan per year.

looking back a year ago, the last round of existing mortgage interest rate adjustments significantly reduced the interest rate gap between existing mortgage loans and new mortgage loans.august 31, 2023the central bank and the state administration of financial supervision issued the "notice on relevant matters reducing the interest rates of existing first home loans" and decided to lower the interest rates for existing first home loans that meet the conditions starting from september 25 of the same year. borrowers can reduce the pressure on their existing mortgage loans by applying for new loans to replace their existing mortgage loans and changing their interest rates.

subsequently, a number of banks issued announcements that they would reduce the existing first-home loan interest rates in batches starting from september 25, 2023, and clarified the operational details. in early september, the four major state-owned commercial banks, industrial bank of china, agricultural bank of china, china construction bank and china construction bank, issued announcements one after another, clarifying matters related to interest rate adjustments for existing first-home loans, and providing answers to the adjustment scope, adjusted interest rate levels, and adjustment methods. since then, a number of joint-stock banks and local urban and rural commercial banks have followed suit and successively disclosed the details of interest rate adjustments for existing mortgage loans.

the reporter noticed that the "china monetary policy implementation report for the fourth quarter of 2023" previously released by the central bank showed that the weighted average interest rate of newly issued personal housing loans that year was 3.97%, 0.29 percentage points lower than the same period last year, and the stock exceeded 23 trillion yuan. the interest rate on first-time home loans has been reduced by an average of 0.73 percentage points, reducing borrowers’ interest expenses by approximately 170 billion yuan each year.

image source: china’s monetary policy implementation report for the fourth quarter of 2023

may 17, 2024home loan policy comes out with new policies. in order to adapt to the new situation of major changes in the supply and demand relationship in my country's real estate market, the central bank has canceled the lower limit on personal housing loan interest rates at the national level. most cities have canceled the lower limit on local first and second home loan interest rates. financial institutions can independently determine the personal interest rates for customers. home loan interest rates. since then, the gap between old and new mortgage interest rates has widened again, so home buyers are particularly concerned about the new round of reductions in existing mortgage interest rates.

currently, the average interest rate on our existing mortgage loans is about 4%, or even higher. based on this calculation, if the commercial loan amount is 1 million yuan and the repayment period is 30 years, then after the interest rate is reduced by 50 basis points, the monthly payment will be reduced by about 280 yuan, and the interest expense can be reduced by more than 100,000 yuan in 30 years.

it is worth noting that last year’s reduction in existing mortgage interest rates did not include second homes; however, this reduction includes both first and second homes, which shows the strength of the policy.

"because there are many borrowers involved, banks also need a certain amount of time to make necessary technical preparations." pan gongsheng said in the release that in the next step, the central bank is also considering guiding commercial banks to improve the pricing mechanism of mortgage loans, with both banks and customers make dynamic adjustments through independent consultation based on market-oriented principles.

as a home buyer, the reporter consulted the personal loan departments of several banks in beijing and shanghai regarding the reduction of existing mortgage interest rates.staff members all said they still need to wait for specific details to be released.. "the specific execution time and operation methods will have to wait until the regulatory authorities issue detailed rules, and then we will have a meeting to discuss the implementation. once the detailed rules come out, we will notify them uniformly," said an icbc staff member.

the industry's net interest margin is still at a historical low, and banks have "difficulties" in switching to mortgage business

the reporter noticed that in addition to the "repricing" similar to last year, there is also the "remortgage business" among the currently hotly discussed models for reducing interest rates on existing mortgages in the market. according to the financial times, regarding the issue of inter-bank re-mortgage of existing housing loans, the central bank stated on september 24 that it will initially implement re-mortgage within the bank (commercial bank), and then consider whether there is an opportunity (allow) inter-bank re-mortgage. .

"repricing" means that existing mortgage borrowers negotiate with the original lending bank to set a new interest rate for the mortgage, and the home buyer transfers the mortgage from bank a to bank b with a more favorable interest rate, and signs a mortgage contract based on the latest loan elements; while "remortgage" "in business, the lender can change the lending bank. that is, the existing mortgage interest rate in bank c is 4.3%, but the interest rate of the new mortgage loan is 3.3%. then you can negotiate with bank c to sign a new contract and synchronize the interest rates. to 3.4%.

so, how do commercial banks implement the “remortgage” business? what are their "difficulties"?

"do you want an official answer?" the person in charge of the personal loan center of a major bank in the western region told reporters with a smile that there have been many customers consulting recently, but no operating rules have been issued yet. all we can say is, "our bank has paid attention to the relevant news and is currently actively studying relevant plans and specific operating rules. after receiving the official documents from the regulatory authorities, we will advance the implementation in an orderly manner as soon as possible and in accordance with the law. in the future, our bank will follow up through the official website, branches, customers specific operational guidelines have been announced through service public accounts and other channels, and you are welcome to consult them at any time.”

looking back on the past, during the large-scale adjustment of existing mortgage interest rates in 2008, "inter-bank mortgage transfers" were also liberalized. at that time, the central bank lowered the lower limit of mortgage interest rates from 0.85 to 0.7 times. in order to retain customers, many small banks started inter-bank mortgage transfers and vigorously discounted interest rates. however, at that time, banks' net interest margins were relatively high, mostly above 3%, and profits were huge. even after the "interest discount war" in the existing mortgage-to-mortgage business, there is still a net interest margin of more than 2%.

today is different from the past. on august 9, the state administration of financial supervision released data on the main regulatory indicators of the banking and insurance industry in the second quarter of 2024, which showed that the net interest margin of my country's commercial banks was 1.54%, consistent with the first quarter of 2024. compared with the same period last year, it dropped by 20 bp and is at a historical low.

according to statistics from reporters, the net interest margins of a-share listed banks continued to narrow in the first half of the year. according to oriental fortune choice data, as of the end of june 2024, the average net interest margin of 42 a-share listed banks was 1.64%, a decrease of 0.14 percentage points from the end of the previous year and a decrease of 0.22 percentage points from the same period last year.

among them, the net interest margin of 16 listed banks is lower than the industry average of 1.54%, 4 banks are equal to the industry average, and a total of 30 are lower than the 1.8% in the "implementation measures for qualified prudential assessment (2023 revised edition)" rating "cordon".

industry: remortgage business needs to find a balance between risk control and market activity

what are the risks and difficulties in the actual operation of remortgage business?

political commissar lu, chief economist of industrial bank, pointed out that from the perspective of issues that need to be considered in the development of "remortgage" business, in the inter-bank "remortgage" business, we must consider the revaluation of the collateral value, the change of mortgage ownership, the risk of different banks loan standards vary among them. in addition, from the perspective of operational convenience, yan yuejin, deputy director of shanghai yiju real estate research institute, believes that "remortgage" may add a lot of extra workload. in fact, in previous adjustments to existing mortgage interest rates, banks generally adopted a simpler method, that is, automatically adjusting the system to directly reduce the monthly payment amount in subsequent months without requiring additional operations from the customer.

"compared with repricing, remortgage business is a relatively complex financial business involving multiple stakeholders. it is necessary to find a balance between risk control and market activity." a senior banking industry researcher told reporters. he thinks,for banks, the primary impact faced is interest spread compression, especially for banks whose net interest margin and profitability are under pressure. in addition, banks may need to lower interest rates to attract and retain customers, which will increase competitive pressure in the market.

from an operational perspective, remortgage involves multiple links, which increases the bank’s operating costs and operational difficulty. the person said, "in the short term, remortgage business may compress the bank's interest margin space and affect its short-term earnings. however, in the long term, remortgage may also reduce the non-performing loan ratio to a certain extent, improve asset quality, and strengthen the bank's market competitiveness.”

why does the remortgage business operate within the bank first and does not support cross-bank operations for the time being?

this person believes that the initial implementation of remortgage within the bank can avoid the complexity caused by cross-bank operations and reduce coordination costs and risks. at the same time, it can also avoid unbalanced competition among banks and affect market stability. "inter-bank transfer of mortgages involves more legal and operational difficulties, such as changes in mortgage rights, information sharing and other issues, which require further policy and technical preparations."

in this regard, wang qing, chief macro analyst of oriental jincheng, said that the existing mortgage loans will be "remortgaged" within the bank, that is, the interest rates of existing mortgage loans will be repriced, which is the same as the reduction path in september last year. the reason why it is emphasized that "remortgage will be implemented within the bank in the initial stage" is mainly because the current existing mortgage loans are still high-yield, low-risk high-quality assets for banks. allowing remortgage across banks will intensify competition among banks, especially for existing mortgage loans. large banks with a relatively high proportion of scale will have a greater impact.

"for home buyers, the property needs to be re-evaluated when actually handling the remortgage business. if the property valuation drops, it may lead to a reduction in the amount of loans available." the person reminded that if housing prices fall, it may affect the loan amount in the remortgage operation brings additional financial burden to the homeowner. in addition, attention should also be paid to the fees and time costs that may arise during the business process, as well as the uncertainty caused by changes in personal credit status regarding the results of new loan applications.

how does overseas remortgage business operate?

minsheng macro team analysis believes that taking the united states as an example, during the 2008 financial crisis, the country launched the housing affordable refinancing program (harp) to help struggling homeowners reduce their repayments by lowering interest rates or extending loan terms. payment pressure.

in addition, japan's remortgage business mainly relies on innovation in contract terms to optimize loan conditions. for example, the "flat 35" product offered by japan housing finance corporation (jhf) allows borrowers to choose a long-term mortgage loan with a fixed interest rate to cope with the risk of interest rate changes. residents can apply for a 0.25% discount for the first ten years of repayment and an additional 0.25% discount for the first five years. at the same time, the interest rate is reviewed monthly, and there is a probability of changing the fixed interest rate in the contract.

from the perspective of the implementation entity, the remortgage policy in the united states is led by the government, and special purpose agencies are set up to acquire existing mortgage loans from banks, which not only ensures the health of commercial banks' balance sheets, but also ensures the scope and effectiveness of the mortgage policy implementation; in japan, innovative contract terms, such as the long-term fixed-rate loans provided by "flat 35", are used to attract borrowers to remortgage, thereby reducing interest rate risks.