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following the announcement of a number of favorable real estate policies by the central bank, the state administration of financial supervision and other departments on september 24, including interest rate cuts, reserve requirement ratio cuts, and existing mortgage interest rates, the heavyweight financial "combination punch" of china's real estate market has finally been implemented.

on the evening of september 29, the central bank and the state administration of financial supervision issued four policies to stabilize real estate, including guiding banks to lower existing mortgage interest rates, unifying the minimum down payment ratio for mortgages to 15%, extending the period of some real estate financial policy documents, and optimizing the redevelopment of affordable housing. loan policy.

from a comprehensive market analysis, the "four arrows" will have a positive impact on the real estate market and china's macro-economy, helping to stabilize economic growth expectations and boost market confidence.

existing mortgage interest rates lowered

as the "contradiction" between old and new mortgage interest rates continues to accumulate and expand, calls for reducing existing mortgage loans are gradually rising.

in terms of policies to stabilize the property market, the content that has attracted the most attention from the market this time is the reduction of existing mortgage interest rates and the unification of the minimum down payment ratio for mortgages.

the central bank announced that it would guide commercial banks to lower existing mortgage interest rates to near the new loan interest rates, with the average reduction expected to be around 0.5 percentage points.

at the same time, the central bank issued a notice that commercial personal housing loans will no longer distinguish between first and second homes, and the minimum down payment ratio will be unified to no less than 15%. on the basis of the national unified minimum down payment ratio, all provincial branches of the people's bank of china and all local offices of the state financial supervision administration shall independently determine whether to set differentiated down payment ratios in each city under their jurisdiction in accordance with the principle of city-specific policy implementation and the regulatory requirements of the governments of each city under their jurisdiction. minimum down payment ratio policy, and determine the minimum down payment ratio lower limit for each city in the jurisdiction.

china business news learned from the central bank that as of the end of july, the weighted average interest rate of all existing mortgage loans was approximately 4.06%. in the first eight months of 2024, the average interest rate for new mortgage loans nationwide was 3.61%.

the "initiative on batch adjustment of existing mortgage interest rates" clarifies that before october 31st, the lpr (loan market quoted interest rate) point increase rate for existing mortgage loans with a point increase rate higher than -30 bp will be adjusted in batches to no less than -30 bp. after the adjustment, the existing mortgage interest rate will drop to approximately lpr (3.85%)-30bp=3.55%, which is slightly lower than the national average interest rate for new mortgage loans in the first eight months of 2024 (3.61%). after the adjustment, the interest rate will drop by about 0.5 percentage points from the 4.06% before the adjustment. the drop is expected to be an average, and the specifics will be different for each contract.

an authoritative market expert told china business news that if the central bank's policy interest rate cut of 0.2 percentage points is taken into account, the lpr may follow the decline on october 21. after loan repricing, the adjusted existing mortgage interest rate will be significantly lower than 3.55. %, significantly saving mortgage borrowers’ interest payments.

taking an existing mortgage with a term of 1 million yuan, 25 years, and equal principal and interest repayments as an example, assuming that the mortgage interest rate is reduced from 4.4% to 3.55%, the borrower's interest expense can be saved by approximately 5,600 yuan per year.

wen bin, chief economist of china minsheng bank, said that compared with the existing mortgage interest rate reduction policy in september 2023, this policy has been strengthened in both the scope of application and the magnitude of the reduction. among them, the scope of application does not distinguish between the first and second homes in stock, so it is applicable to the entire existing mortgage market size; the reduction range is an average reduction of 50 basis points, which exceeds the previous adjustment in the point increase range under city-specific policies. this reduction in the existing mortgage interest rate policy is expected to alleviate the "early loan repayment wave". trading "price reduction" for "quantity stability" will help stabilize the scale of bank assets and at the same time enhance residents' consumption vitality.

the above-mentioned authoritative experts said that after the batch adjustment is completed, the decline in existing mortgage interest rates is expected to reduce bank interest income by approximately 150 billion yuan. however, after the interest rate difference between new and old mortgages narrows, early loan repayments will be significantly reduced, which will help banks stabilize loan scale and improve loan quality.

policies to stabilize real estate are “bombing in turns”

in addition to existing mortgage loans, the central bank also adjusted the financial support ratio of the 300 billion yuan affordable housing re-loan created in may from the original 60% to 100% to enhance market-based incentives for banks and acquisition entities.

on may 17, the central bank announced the establishment of a 300 billion yuan affordable housing refinancing program to support local state-owned enterprises in acquiring completed but unsold commercial housing at reasonable prices to be used as placement-type or rental-type affordable housing.

the china index research institute believes that this move will help increase the scale of commercial bank loans and will have a certain positive impact on local procurement and storage. in addition, increasing the proportion of re-lending capital can also reduce the acquisition and storage costs of state-owned enterprises.

at the same time, if there are applicable deadlines in the two policy documents of operating property loans and "financial 16" that are due before the end of the year, the applicable deadlines will be extended to december 31, 2026.

wang qing, chief macro analyst of oriental jincheng, believes that these policies will significantly speed up the acquisition of existing commercial housing in various places for use as affordable housing and alleviate inventory pressure on the commercial housing market. all localities will focus on implementing the urban real estate financing coordination mechanism, and the sources of credit financing for real estate companies will maintain a momentum of continuous improvement.