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mortgage reduction, down payment reduction, inventory reduction, deadline extension... on the evening of september 29, a whole set of real estate policy "combinations" were launched, and the entire market was boiling.

on the same day, the people's bank of china issued four new policies, including lowering existing mortgage interest rates, optimizing the minimum down payment ratio policy for personal housing loans, optimizing refinancing of affordable housing, and extending the period of some real estate financial policies. this is also a "game of chess" action to respond to the concerns of the masses and quickly implement the real estate market regulation policy deployment at the political bureau meeting of the central committee on september 26.

after the new policy was released, banks responded quickly. the six major state-owned banks, including the industrial and agricultural bank of china, the china construction bank, the china construction bank, the postal savings bank of china, and the postal savings bank of china, as well as joint-stock banks such as china citic bank, industrial bank, and china merchants bank, issued announcements to implement batch adjustments to existing mortgage interest rates before october 31. in addition, first-tier cities such as shanghai, guangzhou, and shenzhen quickly followed up and optimized and adjusted housing purchase restriction policies.

according to experts, with the implementation of the "combination punch" to stabilize the property market, the real estate market is expected to stop falling and stabilize as soon as possible.

the last batch adjustment of existing mortgage interest rates

following the people's bank of china's announcement on september 24 of five new real estate finance policies, including lowering existing mortgage interest rates and unifying the minimum down payment ratio for mortgage loans, china's real estate finance heavyweight "combination punch" was quickly implemented in just a few days.

on the evening of september 29, the people's bank of china and the state administration of financial supervision issued four policies to stabilize the property market, 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 guarantees. sexual housing refinancing policy.

among them, the most concerning thing is the adjustment of existing interest rates. on the same day, the people's bank of china issued an announcement to improve the interest rate pricing mechanism for commercial personal housing loans. it is clarified that starting from november 1, 2024, when the interest rate of floating-rate commercial personal housing loans deviates from that of newly issued commercial personal housing loans across the country to a certain extent, the borrower can negotiate with the banking financial institution, and the banking financial institution will newly issued floating-rate commercial personal housing loans replace existing loans.

as we all know, according to the contract, the additional points on the previous mortgage loan based on lpr are fixed during the contract period. mortgage contract terms are generally long, and the fixed point margin cannot reflect changes in borrower credit, market supply and demand and other factors. once the market situation changes, it is easy to cause the spread between new and old mortgages to widen. as the market-oriented reform of interest rates continues to deepen, it is necessary to optimize the system design and promote commercial banks and borrowers to change their contracts in an appropriate manner.

the previous minimum interest rate repricing cycle for personal housing loans was one year. but this time, the people's bank of china also proposed that starting from november 1, 2024, if the contract stipulates a floating interest rate, borrowers who meet certain conditions can negotiate with the bank to agree on the point increase range and repricing cycle.

a beijing business daily reporter learned that repricing cycles can be yearly, half-yearly, quarterly, etc. it should be noted that in the interest rate downward stage, the shorter the repricing cycle, the sooner borrowers can enjoy low interest rates, but in the interest rate upward stage, borrowers also have to bear high interest rates sooner.

authoritative experts told reporters from the beijing business daily that the people's bank of china has adapted to changes in the market situation, responded to the expectations of the people, further deepened the market-oriented reform of interest rates, improved market competition, improved the mortgage interest rate pricing mechanism, and allowed the existing mortgage interest rates to deviate to a certain level from the national new mortgage interest rates. when the interest rate increases, the borrower and the borrower can adjust the point increase rate through negotiation, contract changes, etc., so as to guide the existing mortgage interest rates to reflect changes in market interest rates in a timely manner and reduce them to near the national average interest rate for new mortgage loans. this will help borrowers further reduce mortgage interest payments and increase residents' willingness to consume. it will also help stabilize home buyers' expectations and boost confidence.

so, how soon can home buyers enjoy the benefits of falling interest rates on existing mortgages? according to the "initiative on batch adjustment of existing mortgage interest rates" announced by the interest rate self-regulatory mechanism, it is clear that before october 31, 2024, commercial banks will carry out another batch adjustment of eligible existing housing loans, and lower the interest rates of existing housing loans with higher interest rates to the interest rates for newly issued mortgages across the country are around the same level, allowing borrowers to benefit as soon as possible. in the batch adjustment stage, existing mortgage loans for first, second and above homes can be adjusted. existing mortgage loans that have had their point markup adjusted last year are also included.

starting from november 1, in accordance with the requirements of the announcement, borrowers who meet the conditions can negotiate independently with the bank according to certain rules, replace the existing mortgage loan with a new loan, and adjust the mortgage interest rate increase range. at the same time, if the policy allows, according to the provisions of the civil code, the contract can be changed by both parties through consensus. therefore, the borrower and the borrower can also adjust the mortgage interest rate increase and other terms by changing the contract.

bank responds quickly

after the interest rate cut, how much can it reduce the interest expenses of home buyers? the "initiative on batch adjustment of existing mortgage interest rates" clarifies that during the batch adjustment stage, commercial banks will reduce the point increase rate for existing mortgage loans that is higher than -30 basis points on the loan prime rate (lpr) to -30 basis points, and shall not be lower than -30 basis points. the city where you are located currently implements a minimum point limit for new mortgage loans. to put it simply, it is adjusted uniformly to the loan market quoted interest rate lpr-30 basis points.

at present, except for the housing loans in beijing, shanghai, and shenzhen that implement the second-home loan policy, which are adjusted to the lower limit of the new housing loan interest rate policy currently implemented, the existing housing loans in most other areas can be adjusted to no less than lpr-30 basis points. , most of the existing commercial personal housing loans with higher interest rates are within the adjustment range.

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. after batch adjustments are completed, it is expected that this policy will benefit 50 million households with a population of 150 million, and save 150 billion yuan per year for households with existing mortgage loans.

however, it is worth noting that if the people’s bank of china’s previous policy interest rate cut of 20 basis points is taken into account, the lpr may follow the 20 basis point drop on october 21. dong ximiao, chief researcher of china merchants union, pointed out that after loan repricing, the adjusted existing housing loans the interest rate level will also be significantly lower than 3.55%, falling to about 3.35%, and the mortgage interest rates of some borrowers will drop by more than 100 basis points, which will significantly save the interest expenses of mortgage borrowers.

after the policy was promulgated, shanghai fired the "first shot" of its implementation. on september 29, the "shanghai release" announced a notice on further optimizing policy measures for the real estate market, which mentioned that the housing credit policy will be optimized. these include implementing the national policy on reducing existing mortgage interest rates, guiding commercial banks to steadily and orderly reduce existing mortgage interest rates to near the new loan interest rates, and further reducing the mortgage interest expenses of home buyers.

as the executors, the six major state-owned banks of industry, agriculture, china, construction, communications and postal savings bank have also collectively announced that they will implement batch adjustments to existing mortgage interest rates before october 31. icbc stated that it is advancing the adjustment of existing mortgage interest rates in an orderly manner and plans to announce specific operational guidelines and related matters on october 12, 2024 through icbc’s official website, wechat official account, outlets, 95588 and other channels. the agricultural bank of china pointed out that it is carrying out preparations for interest rate adjustments on existing commercial personal housing loans in an orderly manner in accordance with the law and will announce specific operational matters on october 12, 2024.

the bank of china mentioned that it plans to release specific implementation details on october 12, 2024 through the bank’s official website, official wechat public account, loan agency bank, 95566 and other channels. china construction bank emphasized that it is working hard to formulate an implementation plan for batch adjustments to existing mortgage interest rates, and plans to release specific operational details on october 12, 2024. relevant matters will be released in a timely manner on the bank's official website, wechat official account, outlets and other channels.

among joint-stock banks, china citic bank, industrial bank, china merchants bank, etc. also issued relevant announcements. china citic bank said, "we are currently working hard to formulate an implementation plan for existing mortgage interest rate adjustments, and plan to release specific operational details on october 12, 2024." complete batch adjustments before march 31st." regarding whether the mortgage interest that has been paid before the adjustment of the mortgage interest rate and is higher than the interest rate after the adjustment can be refunded, some banks said that they do not support it for the time being. the adjustment of the existing mortgage interest rate will not be retroactive.

yan yuejin, deputy director of shanghai yiju real estate research institute, emphasized that this policy adjustment of existing mortgage interest rates has started the second operation of reducing existing mortgage loans since last year. it has a very good guidance and the monthly payment pressure has been reduced. for boosting consumer confidence has a positive effect.

what impact will it have on borrowers and banks?

lowering the existing mortgage interest rate is of great significance. on the one hand, it will help reduce borrowers’ mortgage interest expenses, stabilize and expand housing consumption demand, and thereby promote the healthy and stable development of the real estate market; on the other hand, it will help narrow the existing mortgage loan and new mortgage loan the interest rate spread reduces residents' clustering of early repayments and illegal "on-loan" behaviors, and retains high-quality mortgage customers for banks; at the same time, it helps reduce residents' housing consumption burden, promotes residents to convert savings into consumption and investment, and boosts residents' willingness and ability to expand consumption.

xue hongyan, deputy director of xingtu financial research institute, emphasized that there are three major concerns in the details of the existing mortgage interest rate adjustment. first, the regulatory agency will guide commercial banks to make a batch adjustment before october 31 to lower the new loan interest rate. nearby, home buyers can complete the operation online, reflecting the inclusiveness and mandatory features of the policy; secondly, starting from november 1, if they are still dissatisfied with the interest rates after batch adjustments, home buyers can negotiate with the lending bank to adjust the interest rate again. reduce the point range to better reflect the risk characteristics of home buyers and reflect the market-oriented characteristics of interest rate pricing. in theory, high-quality borrowers are expected to obtain better pricing levels; third, cancel the mandatory requirement of a one-year interest rate repricing cycle. , home buyers can negotiate with banks to adjust mortgage interest rates on a quarterly basis to reflect changes in market interest rates in a more timely manner and enjoy the benefits of interest rate cuts as early as possible.

for home buyers, the reduction in existing mortgage interest rates is a major benefit. as a high-quality credit asset of banks, the impact of the reduction in existing mortgage interest rates has also attracted attention. in this regard, 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. considering that the people's bank of china lowered the deposit reserve ratio by 0.5 percentage points and the policy interest rate by 0.2 percentage points, it is expected to drive down interest rates such as the medium-term lending facility (mlf) interest rate, which will also save banks' liability costs, improve banks' sustainable operating capabilities, and provide banks with better support the real economy and provide necessary support. taking these policy measures into consideration, the impact on banks' net interest margins is basically neutral.

dong ximiao further pointed out that this move saves banks’ liability costs, helps improve banks’ sustainable operating capabilities, and provides necessary support for banks to better support the real economy. taking these policies and measures into consideration, after the adjustment of existing mortgage interest rates, banks' net interest margins are expected to remain basically stable, and banks' ability to develop steadily and serve the real economy will remain basically unchanged.

lin yingqi, a banking analyst at the cicc research department, predicts that assuming that the 1-year and 5-year lpr is reduced by 20 basis points, and the existing mortgage interest rate is reduced by 50 basis points on average, we estimate that the impact on the interest spread will be 9 basis points and 6 basis points respectively. a total of about 15 basis points, assuming that the deposit interest rate is reduced by 25 basis points and the reserve requirement ratio is reduced by 50bp, it can basically offset the impact on bank interest margins.

in order to ensure that the banking system has sufficient "ammunition", regulators have previously revealed that they will enhance the core tier-one capital of six large commercial banks, and implement it in an orderly manner in phases and batches according to the overall plan, and continue to urge large commercial banks to improve refined management. level and strengthen high-quality development capabilities under capital constraints.

policy "combination punch" is launched to stabilize the property market

as early as august last year, the people's bank of china, together with the state administration of financial supervision, guided commercial banks to reduce existing mortgage interest rates in an orderly manner. the people had a strong sense of gain and achieved good results. after the lower limit of the national mortgage interest rate policy was lifted on may 17 this year, the interest rates of new mortgage loans dropped significantly, further reducing the interest expenses of residents on home purchases.

it is worth mentioning that in recent years, the people's bank of china has continuously introduced "combination measures" to stabilize the property market, improved macro-prudential policies for real estate finance, and implemented comprehensive policies from both supply and demand ends. it has repeatedly lowered the minimum down payment ratio of personal housing loans and reduced loan interest rates, canceling the lower limit of interest rate policies, and establishing a series of policies such as refinancing for affordable housing to support the acquisition of existing commercial housing.

in addition to guiding banks to make batch adjustments to existing mortgage interest rates, the people's bank of china has also unified the minimum down payment ratio for mortgage loans to 15%. according to the latest notice, in order to better support the rigid and diversified housing 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%.

as soon as the news came out, shanghai, shenzhen and other places responded quickly and issued notices. shanghai mentioned that the minimum down payment ratio for commercial personal housing loans for first homes was adjusted to no less than 15%. the minimum down payment ratio for commercial personal housing loans for second homes is adjusted to no less than 25%; the minimum down payment ratio for second home loans in areas with differentiated policies is adjusted to no less than 20%. the minimum down payment ratio for housing provident fund second home loans will be adjusted accordingly.

at the same time, we will optimize the refinancing policy for affordable housing. on may 17, the people's bank of china announced the establishment of 300 billion yuan in affordable housing refinancing, guiding financial institutions to follow the principles of marketization and rule of law to support local state-owned enterprises to acquire completed and unsold commercial housing at reasonable prices for placement or placement. rent-type affordable housing is an important measure to destock the real estate market. in order to further enhance market-based incentives for banks and acquisition entities, the people's bank of china increased the proportion of the people's bank of china's capital contribution in the affordable housing re-lending policy from the original 60% to 100%.

for example, commercial banks originally provided 10 billion yuan, and the people's bank of china provided 6 billion yuan. now, commercial banks provide 10 billion yuan, and the people's bank of china provides 10 billion yuan of low-cost funds. this will further accelerate the process of destocking commercial housing.

the deadlines for two real estate finance policy documents have also been extended. previously, the people's bank of china and the state administration of financial supervision had issued two policies, the "16 financial articles" and operational property loans, which had played a positive role in promoting the stable and healthy development of the real estate market and resolving real estate market risks. the latest notice mentioned that the "notice of the people's bank of china and the china banking and insurance regulatory commission on doing a good job in current financial support for the stable and healthy development of the real estate market" (yinfa [2022] no. 254) supports the existing development loans, trust loans, etc. the applicable period of the reasonable financing extension policy has been extended to december 31, 2026; "notice of the general office of the people's bank of china and the general office of the state financial supervision and administration on the management of operating property loans" (yinbanfa [2024] no. 8) if the relevant policies have an applicable period, the applicable period will be extended to december 31, 2026.

yan yuejin commented that there have been positive signals in the real estate market recently, but continued progress is needed in the future. the key is that first-tier cities should optimize and adjust real estate policies. this policy adjustment in shanghai has made a very good start, and has also greatly facilitated the clarification of subsequent policy expectations. it is expected that other cities will continue to make efforts in policy adjustment and optimization in the future. for the "national day" and the fourth quarter the easing of real estate policies has a very good direction.

beijing business daily reporter song yitong and liu sihong