30 years of mortgage underpayment of tens of thousands of yuan, LPR lowered by the central bank after 9 months | decrease | LPR lowered | interest rate | economy | mortgage | policy | decrease
On June 20th, the People's Bank of China authorized the National Interbank Funding Center to announce that on the 20th, the market quoted interest rates for one-year loans and the LPR for 5-year and above were lowered by 10 basis points to 3.55% and 4.2%, both ending nine consecutive months of inaction.
With the LPR reduction, bank mortgage interest rates will also be lowered. Taking the "1 million loan principal, 30 year term, equal principal and interest housing loan" as an example, the monthly payment is expected to be reduced by about 58 yuan, with a total of 30 years of less repayment of about 21000 yuan.
Downregulation is expected
This month, the central bank has continuously lowered interest rates, especially on the 15th, which lowered the medium-term lending facility by 10 basis points. Considering that MLF is the pricing basis for LPR, the market generally believes that this month's LPR reduction is an expected "certainty event".
Dong Ximiao, Chief Researcher of Zhaolian, told China News Finance that the central bank's policy interest rate has been lowered, coupled with multiple rounds of deposit rate cuts since September 2022 and a decrease in bank debt costs, which has driven the LPR reduction this month.
Yan Yuejin, the research director of E-House Research Institute, also believes that this reduction is in line with expectations. There have been many recent news about the central bank's frequent interest rate cuts, which also indicates that the central bank is guiding interest rates down from various levels. So, in the case of interest rate cuts by tools such as MLF, the overall LPR reduction is in line with expectations.
Underpaying tens of thousands of yuan on a 30-year mortgage
With the LPR reduction, it is expected that the interest rates for existing and new mortgage loans will also be lowered.
Yan Yuejin stated that major banks are expected to cut mortgage rates one after another in the next two weeks, with a general decrease of 10 basis points. This also means that a new round of loose mortgage policies will begin.
If calculated using a commercial loan limit of 1 million yuan, a 30 year loan, and equal principal and interest repayment method, the LPR has decreased by 10 basis points this time, resulting in a decrease of approximately 58 yuan in monthly payments and a cumulative decrease of 21000 yuan in payments over the past 30 years.
In addition, Yan Yuejin mentioned that the further reduction of first home loans after interest rate cuts has a positive effect on the subscription of first homes. It is expected that the standards for identifying first homes in various regions will be further lowered in the future, which will have a positive effect on homebuyers to better enjoy the interest rate of first home loans.
Expert: Release positive signals
The State Council executive meeting held on the 16th focused on four aspects: increasing macroeconomic policy regulation, focusing on expanding effective demand, strengthening and optimizing the real economy, and preventing and resolving risks in key areas. A series of policy measures were proposed. The meeting pointed out that in response to changes in the economic situation, more powerful measures must be taken to enhance development momentum, optimize economic structure, and promote sustained economic recovery and improvement.
Yan Yuejin believes that this downward adjustment actively responds to the spirit of the State Council executive meeting and is the first card of a package of stimulus plans, with wind vane significance.
In addition, Yan Yuejin mentioned that this downward adjustment has substantive significance in reducing the cost of medium and long-term loans, which means that efforts will continue to be made in areas such as reducing costs in the real economy in the future. This is also a policy effect that needs to be focused on at present.
"Next, we need to accelerate the optimization of differentiated housing credit policies, implement policies tailored to the city and district, cancel unreasonable purchase and loan restrictions, moderately reduce the interest rate of existing housing loans, and better meet residents' demand for improved housing." Dong Ximiao said.
