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after the commercial personal housing loan interest rate pricing mechanism is improved, how will the borrower's existing housing loan interest rate be reduced?

on the evening of september 29, the people's bank of china issued announcement [2024] no. 11 to improve the interest rate pricing mechanism for commercial personal housing loans and promote the reduction of existing housing loan interest rates.

announcement no. 11 of the people's bank of china [2024] mainly carries out two major optimizations: first, it allows changes to the point increase range of mortgage interest rates based on lpr. borrowers and borrowers can adjust the point increase range through negotiation, contract changes, etc. to more accurately reflect changes in market supply and demand, borrower risk premium and other factors. in the future, the market competition mechanism can prompt commercial banks to negotiate independently with borrowers and adjust the point increase range in a timely manner. there is no need to wait until the interest rate difference between new and old mortgages has accumulated to be large before commercial banks make batch adjustments. this can alleviate conflicts in a gradual and orderly manner and maintain contractual seriousness.

the second is to remove the restriction on the minimum one-year mortgage interest rate repricing cycle. 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.

in principle, all commercial banks should uniformly implement batch adjustments to the interest rates of existing housing loans (including first, second and above) before october 31, 2024. for existing housing loans with a point increase margin higher than -30bp based on lpr, the point increase rate will be adjust it to no less than -30 bp, and no less than the lower limit of new commercial personal housing loan interest rates currently implemented in the city where you are located (if any).

after the existing mortgage interest rate is adjusted, 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 0.2 percentage point cut in the central bank's policy interest rate, 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.

after batch adjustment, how low can the borrower’s mortgage interest rate be?

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. due to different repricing dates, interest rates for different borrowers will differ after batch adjustments. the decrease in interest rates after batch adjustment is mainly caused by the drop in point addition range to -30bp. after repricing, the decrease in lpr in the latest pricing cycle will also be reflected, and the interest rates of borrowers participating in this batch adjustment will be adjusted to the same level.

assume that batch adjustments will be made on october 31, 2024, and it is assumed that the lpr of more than 5 years reported on october 21, 2024 will follow the central bank's policy interest rate and decrease by 0.2 percentage points, from the current 3.85% to 3.65%, and will remain unchanged thereafter. since the lpr of 5 years and above also dropped by 0.25 percentage points and 0.1 percentage points respectively in february and july 2024, for the repricing date of january 1 each year, the adjusted interest rate is 3.9% (the then lpr4 .2%-0.3%), after the lpr repricing on january 1 next year, the interest rate will be 3.35% (the lpr at the time was 3.65%-0.3%). if the repricing date is from the contract issuance date to the date, it is divided into the following situations: if the repricing date is from october 21 to october 31, the adjusted interest rate is 3.35% (the lpr at that time is 3.65%-0.3% ). if the repricing date is from november 1st to december 31st, and from january 2nd to february 19th, the adjusted interest rate is 3.9% (the lpr at that time is 4.2%-0.3%). the interest rate after the repricing is 3.35% (the then lpr is 3.65%-0.3%); if the repricing date is from february 20 to july 21, the adjusted interest rate is 3.65% (the then lpr is 3.95%-0.3%). the interest rate after pricing was 3.35% (lpr at the time was 3.65%-0.3%). if the repricing date is from july 22 to october 20, the adjusted interest rate is 3.55% (the then lpr is 3.85%-0.3%), and the post-repricing interest rate is 3.35% (the then lpr is 3.65%-0.3 %).

how to adjust the lower limit of the new housing loan interest rate policy in cities?

at present, some cities still set a lower limit for new housing loan interest rate policies, and the adjusted point increase rate must not be lower than the lower limit.

taking beijing as an example, the lower limit of interest rate policy for second-home loans in beijing is -5bp for second-home loans within the fifth ring road, and -25bp for second-home loans outside the fifth ring road. when the corresponding second home loans are adjusted in batches, the bonus points are adjusted to -5bp and -25bp respectively.

how to adjust fixed-rate existing mortgage loans

for existing fixed-rate mortgages, convert the latest lpr into points, and then adjust the point margin to -30bp. for example, for an existing fixed-rate mortgage with an interest rate of 4%, and the latest lpr of more than 5 years is 3.85%, first convert the fixed interest rate to 4% = lpr + 15bp, and then adjust 15bp to -30bp.