Steadily releasing demand in the real estate market, Economic Daily: Housing loan interest rates are falling again | Market | Housing loan interest rates
The current real estate market is still slowly recovering, and unstable demand has become the main limiting factor. As one of the ways to reduce costs and stabilize demand, mortgage interest rates have recently dropped again. Many industry insiders believe that the next step is to focus on factors such as residents' income expectations, housing price expectations, and market risks, and take multiple measures to stabilize market demand.
Market vitality needs to be stimulated
On June 20th, the market quoted interest rate for 1-year loans decreased by 10 basis points to 3.55%, and the LPR for 5-year and above loans decreased by 10 basis points to 4.2%. Affected by this, according to the current policy lower limit of commercial personal housing loan interest rates, the lower limit of the first home interest rate is "20 basis points less than the LPR for more than 5 years", which is reduced from 4.1% to 4%, and the lower limit of the second home interest rate is "60 basis points more than the LPR for more than 5 years", which is reduced from 4.9% to 4.8%.
Although the policy lower limit of mortgage interest rates has decreased, the trend of mortgage interest rates will vary in different cities, and the actual implemented mortgage interest rates may be lower. Zou Lan, Director of the Monetary Policy Department of the People's Bank of China, once stated that under the dynamic adjustment mechanism of the first housing loan interest rate policy, as of the end of March this year, 83 cities have lowered the lower limit of the first housing loan interest rate, which is about 10 to 40 basis points lower than the national lower limit and as low as 3.7% to 4%; In addition, 12 cities have abolished the lower limit of interest rates for first-time home loans.
Overall, since the beginning of this year, driven by multiple policy measures, mortgage interest rates have continued to decline. The interest rate for newly issued personal housing loans in March was 4.14%, a year-on-year decrease of 1.35 percentage points. The latest data from Beike Research Institute shows that in June, the average mainstream mortgage interest rate for the first home in Beike Baicheng was 4.0%, and the average mainstream mortgage interest rate for the second home was 4.91%, both of which were basically the same as last month. Among them, the mainstream mortgage interest rates for the first and second homes in June decreased by 42 basis points and 17 basis points respectively compared to the same period last year.
Why did the mortgage interest rate drop again this time? From the statistical data in May, it can be seen that China's overall economic performance is rebounding, but the foundation for economic recovery is not yet stable. The recently held executive meeting of the State Council clearly proposed to further stabilize social expectations, boost development confidence, stimulate market vitality, and promote sustained economic recovery. "The decrease in LPR helps to further reduce the financing costs of enterprises, boost the confidence and expectations of business entities, promote the recovery of effective credit demand, help enterprises accelerate recovery and stable operation, and ultimately drive investment recovery growth," said Wen Bin, Chief Economist of China Minsheng Bank.
Stable expectations are key
Currently, unstable demand has become one of the main factors constraining the recovery of the real estate market. "In February and March of this year, as the economy resumed normal operation, the previously suppressed housing demand was released quickly, and the real estate market experienced a certain rebound. However, as the economy gradually returned to normal track, the real estate market also gradually entered a normal recovery trend." said Fu Linghui, spokesperson for the National Bureau of Statistics and Director of the Department of Comprehensive Statistics of the National Economy.
Reflected in specific data, the sales area and sales volume of commercial housing have both declined, and housing prices have also declined to a certain extent. In the first five months, the sales area of commercial housing was 464.4 million square meters, a year-on-year decrease of 0.9%, which has expanded compared to the 0.4% decrease in the first four months; The sales revenue of commercial housing reached 4978.7 billion yuan, an increase of 8.4%, which has narrowed compared to the 8.8% increase in the previous four months. In May, the overall month on month increase in the sales prices of newly-built commercial housing in 70 large and medium-sized cities fell, while the month on month decrease in second-hand housing. "There are 46 and 15 cities with a month on month increase in the sales prices of newly-built and second-hand residential properties, respectively, a decrease of 16 and 21 compared to the previous month," said Sheng Guoqing, Chief Statistician of the City Department of the National Bureau of Statistics.
Unstable demand is mainly influenced by three factors, namely income expectations, housing price expectations, and market risks. "The unstable income expectations have led to insufficient willingness of residents to spend, and fluctuations in housing prices have to some extent changed the expectation of 'only rising but not falling'. As a result, some homebuyers have adopted a wait-and-see attitude, and the two have jointly caused a decrease in the willingness of the residential sector to spend on housing." Zeng Gang, the director of the Shanghai Financial and Development Laboratory, said that in addition, due to some houses being unable to be delivered on time and abandoned, some residents' concerns about the risks of first-hand houses have increased, which has also affected their willingness to purchase a house.
"Insufficient demand makes it difficult for real estate companies to repair their sales, capital recovery, and high debt and even debt risks for real estate companies, which will further lead to a decline in real estate development investment," said Zeng Gang.
Comprehensive measures to boost confidence
The market generally believes that the decrease in mortgage interest rates this time will help stabilize the demand in the real estate market. "The reduction of LPR can help reduce the cost of purchasing a house and enhance the willingness to buy a house." Wen Bin said that in the composition of domestic demand, the real estate industry, which has a large scale, numerous upstream and downstream chains, and is closely related to the balance sheet of residents, is still relatively important. Driving down mortgage interest rates through the decrease of LPR will become an important part of reversing market expectations and promoting the stabilization of the real estate market.
It is worth noting that the decrease in mortgage interest rates this time not only involves new loans and first home loans, but also covers existing loans and second home loans, with a wider coverage and greater impact. "The decrease in LPR helps to lower the interest rate of existing mortgage loans, slow down the pace of residents' deleveraging, save mortgage interest, and stabilize consumer expectations," Wen Bin said.
Specifically, for the group of people who have already purchased a house, assuming that they are purchasing their first home, with a commercial personal housing loan of 1 million yuan, a term of 30 years, and equal principal and interest repayment, the monthly payment of the buyer will be reduced by about 57 yuan; If it is a second home, the monthly supply will be reduced by about 60 yuan. For new homebuyers preparing to enter the market, due to the current reduction or cancellation of the lower limit of first home interest rates in some cities, their mortgage interest rates may further decline from 3.7% to 4%.
"However, it should also be noted that in addition to loan prices, there are other factors that affect residents' willingness to purchase houses, such as income expectations, housing price expectations, and guaranteed delivery of properties. Therefore, comprehensive measures should be taken to stabilize confidence in the real estate market." Zeng Gang said, firstly, to maintain the liquidity of high-quality real estate enterprises, meet their reasonable financing needs, and avoid risk transmission; Secondly, adapting measures to local conditions, further optimizing and implementing differentiated housing credit policies, and releasing reasonable housing demand; The third is to explore moderately increasing support at the financial policy level. "We must continue to do a good job in stabilizing employment, implement preferential policies for employment, improve residents' income expectations, and enhance the confidence of various entities," said Lou Feipeng, a researcher at China Postal Savings Bank.
"In the next stage, as the economy recovers and policies become more effective, market expectations improve, and the real estate market is expected to gradually stabilize," said Fu Linghui.
