Some customers have temporarily suspended their early repayment plans, and the interest rate on existing housing loans is about to be lowered! Banks actively prepare for war

Introduction: Countdown Last Week

Author | First Finance and Economics Wang Fongran

"Great! The interest rate on existing housing loans is about to decrease, and it is expected that monthly payments can be saved by 800 yuan." Recently, Quan Quan, who has handled housing loan business at a state-owned bank in Guangdong, posted his details on the adjustment of the interest rate on the first housing loan in stock on social media. The app page shows that the executed interest rate before the adjustment was 5.9%, and the planned executed interest rate after the adjustment is 4.3%.

With only the last week left until September 25th when the contract loan interest rates will be adjusted in bulk, some state-owned banks have started preparing for the implementation of the existing mortgage interest rate reduction in advance, opening a section for adjusting the existing mortgage interest rate to facilitate customers to check relevant information in advance. In addition, for situations where the system or judgment is inaccurate, some bank branches have recently conducted centralized screening and invited customers in advance to lower the mortgage interest rate through replacement contracts.

The customer manager of a state-owned bank in Dongguan, Guangdong, told reporters that the number of consultation calls regarding the reduction of interest rates on existing housing loans has increased exponentially in recent times, and most of the relevant business staff are working at full capacity. At present, the form of online section inquiry can effectively increase the efficiency of communication with customers, and at the same time, customers can check in advance before batch adjustment nodes on the 25th to prevent system misjudgment.

Pre heating up the reduction of interest rates on existing housing loans

In the past week, state-owned banks have opened online sections on the app, actively preparing for the upcoming batch of interest rate cuts on existing housing loans on the 25th. According to incomplete statistics, four banks, including China Construction Bank, Industrial and Commercial Bank of China, Bank of China, and Agricultural Bank of China, have launched the "Adjustment of Interest Rates for Existing Housing Loans" section to facilitate information queries for mortgage business customers.

From the perspective of the section information query function, all four banks mentioned above can display whether they have a first-time home loan. One of the customer managers of a branch of a state-owned bank in Guangdong introduced to reporters that "whether to apply for the first home loan" is a key indicator for batch adjustment and also a place where customers are prone to doubt. If it meets the criteria for the first home loan but is not shown as the first home loan, it is necessary to proactively contact the bank to communicate and adjust.

In her opinion, the early launch and adjustment of the query function is partly due to the large customer base of state-owned banks and the relatively high proportion of mortgage business. Recently, there has been a surge in consultation volume, and there is an urgent need for corresponding query entry points. On the other hand, it is also to reduce the probability of system errors and allow customers to check and correct them in advance. In fact, currently there are some customers who have reported certain judgment errors in whether to apply for a first home loan. A state-owned real estate loan client in Guangzhou told reporters that while checking in advance, he found that he was mistakenly judged as "No" by the system in the "Whether the first home loan was issued" column. Later, he contacted the loan review manager by calling the branch's phone number to make manual modifications before completing the correction.

In addition to querying the first home, major banks currently provide some other key query indicators. Construction Bank can query the interest rate adjustment method, current interest rate level, default days, and overdue amount in the "Adjustment of Existing Housing Loan Interest Rate" column. The customer manager of a branch of the bank in Guangdong told reporters that the above indicators are also the most frequently asked indicators by customers. According to the detailed announcement on the reduction of interest rates for existing housing loans previously released by China Construction Bank, there are corresponding regulations on the interest rate method and the number of days in arrears. For loans priced at fixed interest rates or benchmark interest rates, borrowers can apply to convert to floating rate loans priced at LPR and sign an agreement with the bank. Loans that meet the scope of this adjustment, if the number of consecutive arrears exceeds 90 days, will not be adjusted until the arrears are fully repaid. After the arrears are fully repaid, adjustments can be made.

Agricultural Bank of China provides a query on the current executed interest rate after the adjustment in the "Adjustment of Existing Housing Loan Interest Rate" column, allowing customers to directly see the system's calculated reduced housing loan interest rate.

Some banks have also contacted some selected customers before the 25th to ensure the accuracy of the interest rate reduction for existing housing loans, and made manual adjustments. A mortgage client from a state-owned bank in Huizhou, Guangdong said she received a phone call from the bank last Friday and went to sign a new contract on Saturday afternoon. On Sunday, the app showed that it had been adjusted to 4.2%.

The reporter contacted the branch by phone, and the staff told the reporter that last week there was indeed a concentrated invitation for a group of customers selected by the system, and they exchanged the mortgage interest rate through re signing contracts in advance. "Because if the interest rate for the clients on our list is 4.2% after early offline replacement, the unified system may lower it to 4.3% on the 25th," explained the account manager. Industry insiders have analyzed that the difference of 4.2% and 4.3% may be related to the determination of the repricing date. Some banks, in order to ensure accuracy, will handle some customers with system misjudgment risks in advance, and overall, they are still preparing for batch adjustments on the 25th.

Some clients are considering suspending the early repayment plan

What is the scale of the current round of adjustment of existing housing loans behind the intensive preparation of banks? What is the impact on residents?

According to Dai Zhifeng, Chief Analyst of Zhongtai Securities in the banking industry, listed banks provided approximately 23 trillion yuan in mortgage loans from 2018 to 2022, accounting for 65.5% of the current stock mortgage loans of listed banks. Assuming that this portion can enjoy a reduction in the interest rate of stock mortgage loans, it is expected to save residents 138.8 billion yuan in interest expenses, which is expected to have an impact on the interest spread of listed banks in 2024 of approximately 4.7BP. Caixin Securities stated in its research report that according to calculations, the volume of the adjustment of existing housing loans is about 15 trillion yuan. On the basis of an average downward adjustment of 0.8 percentage points, it will bring a loss of interest income of 120 billion yuan.

With the implementation of the detailed rules for the reduction of interest rates on existing bank housing loans and the reduction of interest expenses becoming a foregone conclusion, many bank housing loan clients have stated that they have temporarily postponed their plans to repay loans in advance.

"The original intention of early repayment of loans was to 'stand guard at a high position' and the interest rate was too high." The lender Quanquan told reporters that since the second half of last year, the investment returns of wealth management and funds have not been high. Compared to the 5.9% mortgage interest rate, early repayment of loans is a natural decision.

After the recent reduction in interest rates on existing housing loans is about to come to fruition, Quanquan has temporarily suspended its plan to repay loans in advance. On the one hand, the lowered mortgage interest rate has increased to 4.3%, which is not significantly different from investment returns. On the other hand, Quanquan had originally planned to borrow some more funds from relatives and friends to "scrape together" and repay the loan in advance, which may not be cost-effective after considering the cost of funds.

The whole experience is not an exception. With the reduction of interest rates on existing housing loans, there are signs of a temporary halt to the previously massive "early repayment wave". Recently, officials from relevant departments of the central bank pointed out in an interview with the media that reducing the interest rate on existing housing loans will effectively reduce the interest burden on residents. At present, the situation of early repayment of loans has decreased, and it is expected to achieve substantial improvement. This will be conducive to optimizing the asset liability structure of residents, enhancing their consumption ability and confidence.

The change in early repayment rate under RMBS conditions also confirms this trend. The RMBS Conditional Early Repayment Rate Index is compiled from publicly issued and publicly traded personal mortgage-backed securities, aiming to depict the overall changes in the conditional early repayment rate of its underlying asset pool, and can to some extent reflect the early repayment situation of individual housing loans for residents.

The latest data from the National Interbank Funding Center shows that the RMBS conditional early repayment rate index was 0.149 on September 15th, a significant decrease from the high of 0.215 at the end of May and beginning of June.

However, by comparison, the RMBS conditional early repayment rate index fluctuated between 0.06 and 0.14 in 2022, with the current 0.149 still at a high level. Yang Xin, a macro researcher at Hongta Securities, believes that multiple banks announced interest rate cuts in June, which stimulated residents' willingness to repay loans ahead of schedule. Considering that it takes 1-3 months from appointment, early repayment to approval, a wave of early repayment applications in June was welcomed in August.

Looking ahead to the future, Yang Xin believes that compared to the previous month, there has been a significant rebound in the incremental data of long-term loans in mid August, and the decline in housing transactions has also narrowed. In addition, heavyweight policies such as recognizing but not recognizing loans in first tier cities and lowering interest rates on existing housing loans have gradually been implemented since the end of August, and it is expected that long-term loans for residents in the following months will continue to improve.