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the much-anticipated batch adjustment of existing mortgage interest rates has been implemented.

on the evening of september 29, the people's bank of china issued an announcement to improve the interest rate pricing mechanism for commercial personal housing loans, allowing changes in the percentage points added to the mortgage interest rate based on the lpr; and abolishing the restriction on the shortest one-year repricing cycle of housing loan interest rates.

the market interest rate pricing self-discipline mechanism issued an initiative to guide commercial banks to carry out a batch adjustment of existing mortgage interest rates before october 31, 2024, and reduce the interest rates of existing mortgage loans with higher interest rates to close to the national new mortgage interest rates, so that borrowers can 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.

various commercial banks will issue relevant announcements and batch adjustment details to uniformly reduce the percentage points added to the mortgage interest rate based on the lpr. at present, the announcement by major state-owned banks on adjusting the interest rates of existing personal housing loans shows that specific operational guidelines and related matters will be announced on october 12, 2024 through the official website, wechat official account, outlets, official telephone numbers and other channels, and will be announced in 2024 the batch adjustment of existing mortgage interest rates will be completed before october 31, 2020.

how much can the existing mortgage interest rates be reduced after batch adjustments?

the "initiative on batch adjustment of existing mortgage interest rates" clarifies that during the batch adjustment stage, commercial banks will reduce the point markup on existing mortgage loans that is higher than -30bp to -30bp.

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. if we take into account the central bank's policy interest rate cut of 0.2 percentage points, the lpr may follow suit on october 21. after loan repricing, the adjusted existing mortgage interest rate will be significantly lower than 3.55%, significantly saving mortgage borrowers' interest expenses.

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.

on october 12, many banks will announce detailed rules, and most borrowers can operate with one click.

according to the initiative issued by the market interest rate pricing self-regulatory mechanism on september 29, commercial banks will carry out a batch adjustment of existing mortgage interest rates before october 31, 2024. commercial banks will issue relevant announcements and batch adjustment details to uniformly reduce the points added to mortgage interest rates based on lpr, and provide convenience to borrowers as much as possible.

at present, a number of major banks have announced that they plan to release specific implementation details through official websites, official wechat public accounts, loan agencies and other channels on october 12, 2024, and will adjust the interest rates of existing mortgages before october 31, 2024. implement batch adjustments.

the vast majority of borrowers can complete the "one-click operation" through online banking, mobile banking and other channels without going to a commercial bank branch. for details, please pay attention to the relevant information released by the official platform of the lending commercial bank in a timely manner. after the batch adjustment is completed, both parties can also independently negotiate and dynamically adjust the existing mortgage interest rates based on market-oriented principles in accordance with the people's bank of china announcement [2024] no. 11.

this adjustment no longer distinguishes between first and second homes (except for cities that have a lower limit on mortgage interest rates and distinguish between first and second homes)

in order to adapt to the new changes in the supply and demand relationship in the real estate market, during the batch adjustment and regular adjustment stages, there will no longer be a distinction between first and second homes (except for cities with a lower limit on mortgage interest rates and distinction between first and second homes), and guidance will be given to first and second homes. the interest rate on existing mortgage loans has dropped to around the national average of new mortgage interest rates, reducing the interest burden on borrowers with existing mortgage loans.

on september 29, the people's bank of china and the state administration of financial supervision issued a notice on optimizing the minimum down payment ratio policy for personal housing loans. it stated that for households purchasing housing with loans, commercial personal housing loans will no longer distinguish between first and second homes. , the minimum down payment ratio is uniformly no less than 15%.

what should we do when the existing mortgage interest rates deviate to a certain extent from the national new mortgage interest rates in the future?

if the interest rate of new mortgage loans continues to fall in the future, and when the interest rate of existing mortgage loans deviates from the interest rate of new mortgage loans nationwide to a certain extent, the borrower can negotiate with the bank and apply to lower the interest rate of existing mortgage loans to a level close to the interest rate of new mortgage loans.

the announcement clarifies 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. the re-agreed point increase range should reflect changes in market supply and demand, borrower risk premium and other factors, and the point increase range should not be lower than the lower limit (if any) of the interest rate increase point for commercial personal housing loans in the city where the loan was replaced.

starting from october 2024, in the first month of each quarter, the people's bank of china will announce on its official website the weighted average interest rate of newly issued commercial personal housing loans nationwide in the previous quarter for the reference of banks and borrowers.

how to choose the repricing cycle when issuing a new mortgage?

one of the main contents of the announcement adjustment and optimization is to remove the restriction on the mortgage interest rate repricing cycle to a minimum of one year. starting from november 1, 2024, floating rate mortgages with newly signed contracts will be consistent with other floating rate loans except mortgages, and the repricing cycle can be determined by the borrower and the borrower through independent negotiation. eligible borrowers with existing mortgage loans can negotiate with commercial banks to adjust the point increase in mortgage interest rates and at the same time adjust the repricing cycle so that existing mortgage interest rates reflect changes in the pricing benchmark (lpr) in a timely manner and smooth the transmission of monetary policy.

for newly signed personal housing loan contracts, starting from november 1, the borrower and the borrower can independently negotiate the repricing cycle. the repricing cycle 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.

for existing mortgage loans, during the batch adjustment stage in october, if the repricing cycle is negotiated one-on-one, it will seriously affect the batch adjustment progress and delay the time for borrowers to enjoy low interest rates. therefore, commercial banks should give priority to adjusting the interest rate increase on existing mortgage loans and not adjust the repricing cycle for the time being, so that borrowers can enjoy lower interest rates as soon as possible. starting from november 1, 2024, eligible borrowers can negotiate and adjust the repricing cycle while negotiating with commercial banks to adjust the point increase in mortgage interest rates.