How to adjust it?, The central bank has made it clear! The interest rate of existing housing loans really needs to be adjusted. Bank | Commercial | Housing Loan Interest Rate

The central bank once again talks about adjusting the strength of existing housing loans, releasing a heavyweight signal!

On August 1st, the People's Bank of China and the State Administration of Foreign Exchange held a work meeting for the second half of 2023, which clearly stated in the deployment of work for the second half of the year that commercial banks should be guided to adjust the interest rates of existing personal housing loans in an orderly manner in accordance with the law.

Analysts have calculated that the current scale of existing housing loans is as high as 38.8 trillion yuan. How should interest rates be adjusted in the face of such a large-scale mortgage?

At a press conference in July this year, Zou Lan, Director of the Monetary Policy Department of the People's Bank of China, stated that in accordance with the principles of marketization and rule of law, we support and encourage commercial banks and borrowers to independently negotiate changes to contract agreements, or to issue new loans to replace existing loans.

Why adjust the interest rate of existing housing loans?

The reason for adjusting the interest rate of existing housing loans is that the interest rate is relatively too high.

Zou Lan bluntly stated that although the quoted interest rate in the loan market has decreased by 0.45 percentage points, the interest rate on existing housing loans issued in previous years is still at a relatively high level due to the fixed and unchanging increase in the contract period, which is closely related to the significant increase in early repayment. Early repayment objectively has a certain impact on the profits of commercial banks.

Lowering the interest rate on existing loans will also help unleash consumer potential and boost the real estate market.

Pang Ming, Chief Economist and Director of Research at JLL Greater China, told China News Service that adjusting the interest rate on existing housing loans can reduce the cost and interest burden of residents purchasing houses, better meet the demand for rigid and improved housing, help the real estate market to develop steadily and healthily, and reduce the phenomenon of early repayment and illegal lending behavior driven by the interest rate difference between existing and new housing loans, avoiding interest rate risks, credit risks, and illegal and irregular risks.

In addition, adjusting the interest rate of existing housing loans can also enhance the consumption ability and willingness of residents, support the recovery and expansion of consumption, effectively guarantee and improve people's livelihoods, actively expand domestic demand, play the fundamental role of consumption in driving economic growth, and promote the overall improvement of economic operation.

Zhou Maohua, a macro researcher at the Financial Market Department of Everbright Bank, also believes that adjusting the interest rate of existing housing loans can help reduce monthly mortgage payments and promote consumption to a certain extent; Helps to reduce interest burden, release demand for improvement, activate transactions in the second-hand housing market, and accelerate the recovery of the real estate market. At the same time, guiding commercial banks and homeowners to negotiate independently through marketization and rule of law, and reasonably adjusting the interest rates of existing housing loans can help reduce the pressure of a few bank homeowners to repay loans in advance.

How to adjust the interest rate of existing housing loans?

From the current situation, the vast majority of banks, especially state-owned large banks, have temporarily remained stagnant in their interest rates on existing housing loans.

According to a research report by China Merchants Securities, there is a high possibility of a reduction in the interest rate of existing mortgages. After the central bank expressed support and encouragement for banks to adjust the interest rates of existing mortgage loans, banks need to take necessary measures to respond to the concerns of the general public due to the high degree of people-oriented financial work.

Pang Ming believes that in order for commercial banks to adjust the interest rates of existing personal housing loans in accordance with the law, it is necessary to negotiate with borrowers on an equal, autonomous, and friendly basis under the premise of marketization and rule of law. Commercial banks should adopt the form of changing contract agreements to adjust the rate of interest, or issuing loans with lower interest rates to replace existing existing loans, in order to promote the downward trend of existing housing loan interest rates.

He mentioned that the precedent can refer to the notice issued by the central bank in 2008 on expanding the downward range of commercial personal housing loan interest rates and other related issues, which expands the lower limit of commercial personal housing loan interest rates to 0.7 times the loan benchmark interest rate, and applies to both existing and new housing loans. At that time, various banks introduced adjustment rules for existing housing loans, with different conditions for reducing multiples.

Zhou Maohua also stated that in 2008, some commercial banks adopted a bulk "discount" approach, which is worth learning from. This is mainly to help reduce negotiation costs for commercial banks and improve the efficiency of related business processing. Moreover, the interest rates for individual home purchase loans are not uniform and vary greatly, and using discounts may be more operational. But currently, some banks themselves face significant net interest margin pressure, and different banks have different mortgage business structures, requiring consideration of individual bank differences.

Pang Ming said that for commercial banks, they should accurately assess the borrower's stock mortgage interest rate, mortgage principal size, asset quality, credit record, risk rating, repayment capacity, and whether the first house is built, whether the house is self occupied, and the size of the house, according to the specific guidelines, operating rules and their own operating conditions of the central bank, so as to clarify the standards, conditions, and scope of interest rate adjustment, and implement differentiated pricing, differentiated mortgage strategies, dynamic adjustment of risk control, avoid "one size fits all", "one gust of wind", and "one hot", and do a good job in the pre loan investigation and post loan tracking process.

"As long as the deposit interest rates are adjusted in an orderly manner, the cost of liabilities is effectively controlled, and the interest rate spread is maintained at a reasonable level, commercial banks can achieve a balance between actively and flexibly lowering mortgage interest rates, benefiting the real economy and stabilizing the balance sheet, and doing a good job in meticulous and practical risk management," said Pang Ming.