A stock mortgage of 1 million yuan can save over 5000 yuan per year! How was it calculated?, Wake up from a nap
On the evening of August 31st, the central bank issued two heavyweight messages, which are related to existing and new mortgage loans. Your mortgage interest rate may be about to drop!
On August 31st, the People's Bank of China and the State Administration for Financial Regulation issued a notice on matters related to reducing the interest rate of existing first home loans and a notice on adjusting and optimizing differentiated housing credit policies. Simply put, the interest rate for first-time home loans can be reduced by applying to the bank, and the down payment ratio for newly issued loans and the lower limit of loan interest rates can both be lowered.
On September 1st, there was another news that several banks, including ICBC, have adjusted their deposit listing rates! How do various adjustments affect your money bag?
Existing housing loans
How can interest rates be lowered? How much will it decrease?
The long-awaited adjustment of existing housing loans is here! First, let's highlight the key points for all the lenders.
1、 Adjustment target: Commercial personal housing loans for the first existing home, with attention to the first home.
2、 Adjustment time: Starting from September 25th, 2023.
3、 Adjustment method: 1. The borrower can apply to the lending financial institution to issue a new loan to replace the existing commercial personal housing loan for the first home. 2. You can apply to the lending financial institution to negotiate a change in the interest rate level agreed upon in the contract.
4、 Interest rate level: determined through independent negotiation, but the increase in the quoted interest rate in the loan market shall not be lower than the lower limit of the commercial personal housing loan interest rate policy for the first housing in the city where the original loan was issued.
Why is the interest rate of the stock mortgage after this adjustment not lower than the lower limit of the first home mortgage interest rate policy in the city where it was located at that time?
Dong Ximiao, Chief Researcher of Zhaolian, stated in an interview with China News Service that the main purpose is to maintain the fairness and authority of policies. The national lower limit of the first home loan interest rate has changed in different periods: from October 2019 to May 2022, it was LPR, and from May 2022 to present, it is LPR-20 basis points.
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Regarding who can apply for this interest rate adjustment, Wang Yifeng, Chief Analyst of China Everbright Securities Banking, analyzed in a research report that there are mainly three types: first, mortgage loans that are issued according to the first home policy. The second issue is that when the house was purchased, the family did not have any other housing, but due to the local government's "housing and loan recognition" policy, the loan for the house was processed at the interest rate of the second housing loan. Now, the local government implements the "housing recognition but not loan recognition" policy. Thirdly, when the house is purchased, it is not the only housing for the family, but other housing is sold later through transactions and other means. This housing becomes the only housing for the family and the local government implements the policy of "recognizing the house but not the loan".
According to estimates from regulatory authorities, after adjusting the interest rates for commercial personal housing loans for the first available housing, the financial burden of millions of households and billions of residents will significantly decrease, with an average interest rate decrease of approximately 0.8 percentage points. It is estimated that the clients involved in this adjustment may exceed 40 million, and the loan scale involved in the adjustment may reach 25 trillion yuan.
Taking a stock mortgage of 1 million yuan, with a 25 year term and a original interest rate of 5.1% as an example, assuming the mortgage interest rate drops to 4.3%, it can save borrowers interest expenses of over 5000 yuan per year, significantly increasing their consumption capacity.
Dong Ximiao pointed out that reducing the interest rate on existing first-time home loans has a "one arrow, three eagles" effect: firstly, it helps to reduce the borrower's mortgage interest expenses, stabilize and expand housing consumption demand, and thereby promote the healthy and stable development of the real estate market; Secondly, it helps to narrow the interest rate difference between existing and new mortgage loans, reduce residents' push for early repayment and illegal "lending" behavior, and retain high-quality mortgage customers for banks; Thirdly, it helps to reduce the burden of housing consumption on residents, promote the conversion of savings into consumption and investment, and boost their willingness and ability to expand consumption.
However, some lenders have also told China News Service that their second home mortgage interest rates are relatively high and are not within the scope of this policy. Some lenders also claimed that the interest rate on their first home loan was already the lowest limit at the time and did not qualify for this adjustment.
Newly issued loans
The down payment ratio and the lower limit of loan interest rates have both been lowered
For homebuyers who have not yet bought a house or plan to exchange it, there are also great benefits.
The notice on adjusting and optimizing differentiated housing credit policies issued by two departments has a total of four contents. For residential families who take out loans to purchase commercial housing, the minimum down payment ratio for commercial personal housing loans for their first home is uniformly not less than 20%, and the minimum down payment ratio for commercial personal housing loans for their second home is uniformly not less than 30%.
Regarding this, the responsible persons of the two departments stated that this is the lower limit of the unified national minimum down payment ratio policy for commercial personal housing loans, and there will be no distinction between cities that implement "purchase restrictions" and cities that do not.
Yan Yuejin, the research director of E-House Research Institute, explained that the minimum down payment ratio of 20% has been implemented in many places, but there are still many cities where the minimum down payment ratio for second homes is 40%. The above policies clearly require a unified minimum down payment ratio, providing a better basis for various regions to introduce policies, which will objectively encourage some regions to lower the down payment ratio for second homes.
In addition, the reduction in interest rates for second home loans is significant. According to the above notice, the lower limit of the interest rate policy for commercial personal housing loans for the first set of housing shall be implemented in accordance with the current regulations, and the lower limit of the interest rate policy for commercial personal housing loans for the second set of housing shall be adjusted to not less than the market quoted interest rate for the corresponding term loan plus 20 basis points. Currently, the lower limit of the interest rate for commercial personal housing loans for the first home is "LPR minus 20 basis points".
According to the regulations of the People's Bank of China in 2019, the interest rate for a second commercial personal housing loan shall not be lower than the market quoted interest rate for the corresponding term loan plus 60 basis points. This time, this additional point has directly decreased from 60 basis points to 20 basis points, which will leave a lot of interest expenses for homebuyers who purchase second homes.
Based on a loan of 1 million yuan, an LPR of 4.2%, and a 30-year equal principal and interest, with an LPR of 60 basis points, a monthly repayment of 5246.65 yuan is required; In the case of LPR+20 basis points, a monthly repayment of 5007.61 yuan is required. Over the course of a year, we can repay over 2800 yuan less.
However, the above notice also stipulates that the two departments and their dispatched agencies shall, in accordance with the principle of implementing policies based on the city, guide the pricing and self-discipline mechanisms of market interest rates at the provincial level, and independently determine the minimum down payment ratio and lower interest rate limit for commercial personal housing loans for first and second homes in each city within their jurisdiction based on the real estate market situation and local government regulation requirements.
Zhang Dawei, Chief Analyst of Zhongyuan Real Estate, told China News Service that this policy means that not all cities will follow the minimum down payment ratio and loan interest rate, and cities can still raise their prices based on their own real estate situation. For example, the minimum down payment ratios for the first and second homes in Beijing are 35% and 60% respectively, and the possibility of a significant reduction in the future is relatively small.
Zhang Dawei also stated that overall, except for Beijing and Shanghai, the country has basically implemented the new standards for identifying second homes, which means that if there is no local house, it is considered the first home. Therefore, the mainstream homebuyers in the current market are basically qualified for the first home. The measures taken by the two departments to adjust the lower limit of the down payment ratio this time still need to be implemented in various regions. Non restricted cities have basically implemented them, and only a few cities that still have purchase restrictions may have an impact, especially some second tier cities.
Multiple banks have stated that they have prepared contingency plans
After the notice was issued, several banks including Industrial and Commercial Bank of China, Agricultural Bank of China, Construction Bank, and China Merchants Bank issued a response announcement as soon as possible.
Industrial and Commercial Bank of China stated that it is actively and orderly promoting the adjustment of interest rates for existing personal housing loans in accordance with the law. We will provide convenient services through online and offline channels in accordance with the principles of marketization and rule of law, and carry out interest rate adjustment work in accordance with the law and regulations. Follow up specific operation guidelines and related matters will be announced through ICBC's official website, outlets, WeChat official account and other channels.
The Agricultural Bank of China has announced that, under the guidance of relevant departments, it is actively and orderly preparing for the adjustment of interest rates for first-time personal housing loans in accordance with the law. Agricultural Bank of China stated that it will provide convenient services through online and offline channels in accordance with the principles of marketization and rule of law, and carry out interest rate adjustment work in accordance with the law and regulations.
China Construction Bank has announced that it will actively implement the requirements of the Notice and orderly promote the reduction of interest rates for commercial personal housing loans for existing first homes in accordance with the law. China Construction Bank stated that it will provide efficient and convenient online and offline services in accordance with the principles of marketization and rule of law. In accordance with the notice, it will do a good job in reducing the interest rate of commercial personal housing loans for existing first homes. Under the guidance of relevant departments, the bank will promptly formulate specific operational rules and carry out interest rate adjustment work as soon as possible.
Not long ago, at the mid-term performance meeting of listed banks, several executives of listed banks responded to the issue of adjusting the interest rates of existing mortgage loans at the performance conference. Some banks have also stated that they have formulated plans to lower the interest rates of existing housing loans.
Deposit interest rates will be lowered
Along with the adjustment of existing mortgage interest rates, banks are launching a new round of deposit interest rate cuts to hedge against the impact on net interest margin.
On September 1st, Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of Communications, China Merchants Bank, Industrial Bank of China, CITIC Bank and other banks updated their deposit interest rate tables on their official websites. According to the official website, the one-year annual interest rate of ICBC's lump sum deposit and withdrawal products has decreased by 10BP to 1.55%, the two-year period has decreased by 20BP to 1.85%, and the three-year and five-year periods have both decreased by 25BP, respectively, to 2.2% and 2.25%.
"The net interest margin level of the banking industry has basically approached the bottom line of long-term financial stability. It is imperative and urgent to control the cost of liabilities in the banking system," Wang Yifeng said in his research report.
According to the semi annual report, among the 42 A-share listed banks, 39 banks had a decrease in net interest margin compared to the end of last year, with only Nanjing Bank remaining unchanged, while Jiangyin Bank and Qingdao Bank increased. Among the 42 banks, 17 of them had a net interest margin lower than the industry average of 1.74% in the second quarter.
According to Sheng Liurong, Chief Financial Officer of China Construction Bank, the renegotiation of deposit and mortgage loan interest rates based on market-oriented principles will have a certain impact on the net interest margin of subsequent banks, and there will be some downward pressure overall. Xie Zhibin, Vice President of CITIC Bank, mentioned that according to estimates from some mainstream securities research institutions, for every 10 basis points decrease in mortgage rates, the impact on the industry wide net interest margin is approximately 0.9 to 1 basis point.
According to a research report by China Merchants Securities, the reduction of existing mortgage interest rates will compress bank interest rate spreads and force further reductions in deposit interest rates. Roughly estimated, about 60% of the existing mortgage loans have higher interest rates, and the average rate of interest rate reduction for mortgage loans with higher interest rates is about 100BP. The rate reduction for existing mortgage loans may affect the annual interest income of commercial banks by 0.21 trillion yuan, affecting net profit by about 7 percentage points.
Dong Ximiao said that it is expected that deposit interest rates may continue to decline in the future. However, considering that loan interest rates are currently at a low level, the space for future declines is relatively limited. In the medium to long term, a decrease in risk-free interest rates in the market is the trend. For residents, it is necessary to balance risk and return in order to comprehensively allocate assets.
