The housing loan policy is undergoing significant adjustments: what will be the changes in the interest rate and down payment ratio of existing housing loans? Personal housing | loan | mortgage interest rate

The People's Bank of China and the State Administration for Financial Supervision recently issued a notice regarding adjustments in stock mortgage interest rates, down payment ratios, and other aspects, which has attracted widespread market attention. What adjustments have been made to the new policy? What groups of people will it benefit? What signal is being released again?

The adjustment of interest rates on existing housing loans involves approximately 40 million borrowers

Currently, the supply and demand relationship in the real estate market has undergone significant changes, and the issue of a large interest rate difference between existing and new housing loans has attracted attention. On August 31st, the People's Bank of China and the State Administration of Financial Supervision and Administration issued a notice to guide both parties involved in commercial personal housing loans to adjust and optimize their assets and liabilities in an orderly manner, and to reduce the interest rate of existing first home loans.

According to the notice, starting from September 25, 2023, borrowers of commercial personal housing loans for the first existing housing can apply to financial institutions to issue new loans to replace the commercial personal housing loans for the first existing housing or negotiate a change in the interest rate level agreed upon in the contract. The reporter learned that existing housing loans that have been issued by financial institutions before August 31, 2023, or have signed contracts but have not been issued, and meet the local first home standard, can apply for a reduction in interest rates.

According to calculations, 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 that the borrower and the bank negotiate to lower the mortgage interest rate to 4.3%, it can save the borrower interest expenses by more than 5000 yuan per year.

The relevant person in charge of the People's Bank of China introduced that the decrease in interest rates on existing housing loans can save interest expenses for borrowers, which is conducive to expanding consumption and investment. For banks, it can effectively reduce the phenomenon of early repayment of loans, and compress the space for illegal use of business loans and consumer loans to replace existing housing loans, reducing risks and hidden dangers.

As of the end of June, the balance of personal housing loans in China was 38.6 trillion yuan. Industry insiders estimate that there are nearly 100 million existing loan contracts for first home buyers nationwide, with approximately 40 million borrowers facing negotiated adjustments due to high interest rates. After the interest rate adjustment, the financial burden of these borrowers will significantly decrease, with an average decrease of about 0.8 percentage points.

Regarding this, the relevant person in charge of the financial management department stated that banks are encouraged to handle it in bulk. This can be done by changing the agreed interest rate range for mortgage loans, or by allowing banks to issue new loans to replace existing loans. Financial institutions should promptly formulate specific operational rules, organize and implement them effectively, improve service levels, respond to borrower applications in a timely manner, take convenient measures as much as possible, and reduce borrower operating costs.

Dong Ximiao, Chief Researcher of Zhaolian, believes that the reason for setting the application date from September 25th is to give banks enough time to prepare for revising the contract text, modifying and adjusting the system, identifying customers that meet the standards, and disclosing the processing process and required application materials to borrowers.

The lower limit of the down payment ratio for second homes has been uniformly adjusted to 30%

The two departments also announced on the same day that they will unify the lower limit of the minimum down payment ratio policy for commercial personal housing loans nationwide, and will no longer distinguish between cities implementing "purchase restrictions" and "non purchase restrictions". The minimum down payment ratio for commercial personal housing loans is uniformly set at no less than 20% for the first home and no less than 30% for the second home. Prior to this, the minimum down payment ratios for first and second homes in cities implementing "purchase restrictions" were 30% and 40%, respectively.

In addition, the two departments have also adjusted the lower limit of the interest rate policy for commercial personal housing loans for two sets of housing, which will not be lower than the market quoted interest rate for corresponding term loans plus 60 basis points, and will be adjusted to plus 20 basis points.

Recently, many regions have gradually adjusted the down payment ratio of local housing loans, guiding the actual interest rate of personal housing loans to decline, but it is still limited by the lower limit requirements of the financial management department's previous policies. Experts say that the lower limit of the unified policy will be moderately lowered, leaving more sufficient regulatory space for local governments and helping to better meet the demand for rigid and improved housing.

The lower limit of the first home loan interest rate policy has not been adjusted this time. Dong Ximiao believes that for cities that meet the relevant conditions of the dynamic adjustment mechanism of the first home loan interest rate policy, the lower limit of the local first home loan interest rate can also be temporarily lowered or cancelled.

The second quarter Chinese monetary policy execution report recently released by the central bank shows that at the end of June, 87 cities have lowered the lower limit of first home loan interest rates, which is 10 to 40 basis points lower than the national lower limit, and 13 cities have cancelled the lower limit of first home loan interest rates. The interest rate for newly issued personal housing loans in June was 4.11%, a year-on-year decrease of 0.51 percentage points.

Promoting the implementation of favorable policies to boost market confidence

From clarifying the standard of "recognizing a house without recognizing a loan" for the first home, to continuing to implement the personal income tax preferential policy for residents to exchange houses, and then guiding the reduction of interest rates on existing housing loans and optimizing and adjusting housing credit policies... Recently, a series of real estate policies have been continuously optimized and adjusted, actively implementing the relevant deployment of the Central Political Bureau meeting on July 24th, and the policy toolbox has been continuously enriched.

Wang Qing, Chief Macro Analyst of Dongfang Jincheng, stated that these measures will continue to adhere to the positioning of "housing for living, not for speculation", support the demand for rigid and improved housing, and release signals supporting the healthy and orderly development of the real estate market, which will play an important role in boosting market confidence.

With the release of policies, the market is full of expectations for the relevant measures to be implemented and take effect as soon as possible. Especially for a large number of existing mortgage borrowers, they hope to enjoy policy benefits as soon as possible and reduce their interest burden.

Previously, executives from several banks, including China CITIC Bank and China Merchants Bank, revealed at the mid-term performance conference that they had conducted business analysis and calculation on adjusting the interest rates of existing mortgage loans, and formulated contingency plans. Lin Li, Vice President of Agricultural Bank of China, stated that the bank will quickly formulate specific operational rules, complete the preparation work of the contract text as soon as possible, accelerate the work of system transformation and adjustment, and actively carry out organizational implementation.

The relevant person in charge of the financial management department introduced that the specific interest rate adjustment range is determined through negotiation between the borrower and lender, but the adjusted interest rate cannot be lower than the lower limit of the first home loan interest rate policy in the city where the original loan was issued. This means that the magnitude of the interest rate adjustment mainly depends on the commercial bank's situation of adding points at that time, and the main reduction is the excessive risk premium of the bank at that time.

Xie Zhibin, Vice President of CITIC Bank, stated that there are significant differences in mortgage loan interest rates across different regions, and it is difficult to implement a "one size fits all" adjustment of existing housing loan interest rates. The adjustment efforts should also take into account the actual bearing capacity of the bank.

The People's Bank of China and the State Administration of Financial Regulation have stated that they will closely monitor market trends, guide banks and customers to follow the principles of marketization and rule of law for independent negotiations, and orderly reduce the interest rates of existing housing loans. Support local governments to implement policies and make good use of policy toolboxes, guide the actual down payment ratio and interest rate of personal housing loans to decrease, and better meet the demand for rigid and improved housing.