Will cross bank "mortgage transfer" make a comeback in the industry?, It will take some time for the interest rate reduction of existing housing loans to be implemented. Daily interest rate | existing housing loan interest rate

At the recent press conference of the State Council Information Office, the statement made by Zou Lan, Director of the Monetary Policy Department of the People's Bank of China, regarding the reduction of interest rates on existing housing loans has attracted great attention.

"I'm so happy that we can finally lower the interest rate on our existing mortgage." Mr. Wang told First Financial that he purchased a property in July 2021. As it was a second home, the mortgage interest rate reached 5.75%. Although the LPR has been lowered several times since then, the rate has remained unchanged and is still as high as 5.4%.

Now, the interest rate for newly issued housing mortgages in Mr. Wang's city has dropped to 4.2% for the first home and 4.8% for the second home, with a significant difference between the two. This is also one of the reasons why in the past two years, with the frequent reduction of LPR, there has been a growing demand for a decrease in the interest rate of existing housing loans.

However, according to interviews conducted by First Financial in the banking industry, although regulatory support has been expressed, it will take time for specific rules and plans to be introduced, including how to reduce them, to what extent, and to whom they are suitable, all of which need to be considered.

In addition, considering the cross bank "mortgage transfer" business that occurred when the interest rate of existing housing loans was lowered in 2008, there have been calls for liberalization in the market again in the past two days, with some supporting and others opposing it.

The specific landing will take some time

Since 2019, the LPR for more than 5 years has been lowered 7 times, and mortgage interest rates have also been simultaneously lowered. According to the data disclosed at the press conference of the State Council Information Office, the weighted average interest rate for newly issued personal housing loans in the first half of the year was 4.18%, which is 107 basis points lower than the same period last year. Among them, the personal housing loan interest rate in June was 4.11%, a year-on-year decrease of 51BP.

According to monitoring data from China Index Research Institute, since 2023, more than 40 cities in China have adjusted the lower limit of first home loan interest rates to below 4%, almost falling to historical lows. In this context, the phenomenon of stock mortgage interest rates still standing at a high level has attracted much attention.

At the aforementioned press conference, Zou Lan stated that "in accordance with the principles of marketization and rule of law, we support and encourage commercial banks and borrowers to negotiate independently to change contract agreements, or to issue new loans to replace existing loans.". This is also another mention by the central bank of the adjustment of stock mortgage interest rates after 15 years.

As early as October 2008, the People's Bank of China issued a notice on expanding the downward range of commercial personal housing loan interest rates and other related issues, expanding the lower limit of commercial personal housing loan interest rates to 0.7 times the loan benchmark interest rate. Some small and medium-sized banks were the first to introduce a 70% discount on interest rates and launched cross bank "mortgage transfer" businesses to seize existing users. In this scenario, state-owned banks have also formulated detailed rules for adjusting existing housing loans.

The background at that time was to cope with the impact of the international financial crisis, support residential housing consumption, and promote the expansion of domestic demand. "Afterwards, there was a rapid decline in the interest rates of existing housing loans, which helped stabilize the real estate market, restore consumption, and revive the economy," said Yang Qinqin, an analyst at Huaxin Securities.

Xue Hongyan, Vice President of Xingtu Financial Research Institute, told First Financial Analysis that encouraging banks to carry out stock mortgage replacement business and introducing market-oriented mechanisms will greatly alleviate the problem of active deleveraging by the residential sector. When homebuyers are not in a hurry to repay their loans in advance, they can more comfortably engage in consumer spending, which will also help stabilize consumption and help the economy recover faster and improve.

However, despite high expectations from homebuyers, relevant policies may not be implemented quickly. According to interviews conducted by First Financial in the banking industry, it will take some time for specific rules and plans to be formulated.

The first financial and economic department of a major bank in Guangdong Province replied that they are currently working with regulatory authorities to understand the relevant details and have not yet formulated a specific plan; Another major bank also stated that the relevant plan is currently being prepared.

A person from a joint-stock bank revealed to First Financial that the banking industry is currently studying and striving to launch relevant processes and plans as soon as possible. Moreover, such plans will not be one size fits all, and each bank will set them according to its own situation.

"Personal housing loans are not standardized products, with different interest rates, underlying properties, down payment ratios, and risk attributes. A one size fits all approach is not only difficult to determine, but also prone to problems and significant negative impacts," said Xue Hongyan.

Interbank "mortgage transfer" is on the rise

Looking back at the reduction of stock mortgage interest rates in 2008, small and medium-sized banks took the lead, and it was not until early 2009 that state-owned large banks were forced to take action.

Yang Qinqin believes that compared to 2008, the scarcity of current mortgage loans as excellent assets has further highlighted, and banks will have a stronger awareness of preventing illegal activities. In addition, the preferential treatment of existing housing loans will also put pressure on the stability and sustainable operation of banks, especially on the net interest margin. The pressure on state-owned large banks with a higher proportion of personal housing loan balances is highlighted. Therefore, this round of preferential treatment for existing housing loans is expected to continue from small and medium-sized banks and gradually spread to large state-owned banks.

According to Wind data statistics, the personal housing mortgage scale of the six major state-owned banks, as well as China Merchants Bank and Industrial Bank, all exceeded one trillion yuan by the end of last year. Among them, China Construction Bank had the highest housing mortgage scale, exceeding 6.5 trillion yuan, accounting for 79% of the personal loan balance; The proportion of mortgage loans from Industrial and Commercial Bank of China, Agricultural Bank of China, and Bank of China has also exceeded 70%.

"It can be said that reducing the interest rate on existing housing loans is a painful but long-term beneficial choice for banks, especially large banks," said Dong Ximiao, Chief Researcher of China Merchants Bank.

On the specific operational path, Dong Ximiao analyzed that according to the central bank's statement, there are two ways to adjust the interest rates of existing housing loans: direct reduction and indirect reduction.

"Next, it is recommended to establish a market interest rate pricing self-discipline mechanism and agree on the overall principles for adjusting the interest rates of existing mortgage loans in banks. It is recommended that each bank's head office introduce specific plans to clarify the conditions, standards, processes, etc. for direct and indirect reductions.".

Replacing old loans with new ones, also known as "transferring mortgages," has sparked discussions in the market over the weekend regarding the relaxation of interbank "transferring mortgages," similar to the "digging corners" phenomenon that occurred in 2008, as this can bring incremental customers to some banks.

"If the borrower's bank has not implemented a policy of reducing the interest rate of existing housing loans, while other banks have implemented it, it is not ruled out that some people may engage in interbank 'mortgage transfer' for the sake of interest rates." Zheng Dayuan, the general manager of Guangzhou Dayuan Mortgage, told First Financial. Zheng Dayuan also stated that cross bank "mortgage transfer" has its rationality. On the one hand, under the spirit of the contract, it can avoid modifying existing loan contracts; On the other hand, it also provides banks and borrowers with a free choice opportunity.

According to previous media reports, a small city commercial bank launched a mortgage transfer business under the name of "mortgage loan swap" last year, but was immediately suspended.

"To maintain a reasonable competitive order, I believe that loan replacement should be limited to the bank in principle and should not encourage cross bank 'mortgage transfer'. Dong Ximiao pointed out that, considering the impact on the stable operation of the bank, while reducing the interest rate of existing housing loans, it is possible to agree that borrowers may not make early repayments within a certain period of time.".

Far water cannot quench near thirst

Before the relevant policies for lowering the interest rates on existing housing loans are introduced, early repayment of loans is still the most realistic choice to reduce the interest expenses on existing housing loans.

Zou Lan said at the press conference that in the first half of this year, a total of 3.5 trillion yuan of personal housing loans were disbursed, exceeding 510 billion yuan more than the same period last year, indicating a significant increase in support for housing sales. However, statistical data shows that the overall balance of personal housing loans has slightly decreased, mainly due to changes in price relationships such as investment returns and mortgage interest rates. The phenomenon of residents using deposits or reducing other investments to repay existing loans in advance has significantly increased.

"At present, the pressure of early repayment in banks is still very high," the head of a retail business department in a certain stock industry also told First Financial.

Since the second half of last year, the trend of early repayment of loans has been intensifying. At the beginning of the year, First Financial conducted a small-scale survey, randomly interviewing multiple homebuyers. According to the survey results, the higher the mortgage interest rate, the stronger the willingness to repay the loan in advance.

In addition to early repayment of loans, "commercial to public" is another mode of reducing interest expenses on existing housing loans.

It is understood that since 2022, nearly 20 cities have implemented the "commercial to public" policy. According to incomplete statistics from First Financial, more than ten cities including Harbin and Yangzhou have launched the "commercial to public" business this year.

From the perspective of interest rates, the interest rate of provident fund loans is significantly lower than that of current commercial loans. Among them, for first-time loans, the loan term of less than 5 years is 2.6%, and for loans over 5 years, it is 3.1%; For those identified as second home loans, 3.025% for loans under 5 years and 3.575% for loans over 5 years.

In terms of the specific operation methods of "commercial to public" conversion, there are roughly two types: one is that if the loan bank is not a local entrusted bank for housing provident fund loan business, a "repayment before loan" approach can be adopted. That is, the loan applicant needs to settle the original commercial loan in advance, cancel the mortgage registration, re register the mortgage, register the mortgagee as the housing provident fund center, and the housing provident fund center will disburse funds through the entrusted bank.

If the loan bank and the entrusted bank of the housing provident fund loan are the same bank, they can adopt the method of "sequential mortgage" or "mortgage to loan transfer". That is, the loan applicant needs to settle the balance of the original commercial loan principal and the difference between the payable interest and the commercial to public loan, and establish a new mortgage right in sequence, registering the housing provident fund center as the second sequential mortgagee; The loan from the housing provident fund center is used to settle the original commercial loan in advance, the bank withdraws, and the mortgagee automatically changes to the housing provident fund center.

However, the "commercial to public" policy has also set some restrictive clauses, such as some cities requiring borrowers to apply for provident fund loans for the first time; Some cities require support for owning only one or the first home; In addition, it is required that the ownership of the house is clear and there is no seizure or preservation; The repayment has been made within a certain period and there is no record of overdue payments.

Some hot cities that carry out the "commercial to public" business also indicate that the sustainability of the "commercial to public" business depends on changes in individual loan rates.

For example, the Housing Provident Fund Management Center of Hunan Province issued a document stating that from July 10th, the center's commercial to public loan business will be dynamically managed based on the individual loan rate. If the individual loan rate is below 85%, the center will normally accept commercial to public loan business; When the personal loan rate is between 85% and 90%, moderate flow restrictions should be imposed on the appointment of commercial to public loan business; When the personal loan rate exceeds 90%, the appointment and acceptance of commercial to public loan business will be temporarily suspended.

Due to the high personal loan rate, some cities have clearly stated that they are temporarily unable to start the "commercial to public" business.

For example, on April 6th, the Beijing Housing Provident Fund Management Center stated in an interactive consultation that some provinces and cities are opening "commercial to public" businesses mainly because their housing provident fund personal loan rates and fund utilization rates are relatively low. However, the Beijing Housing Provident Fund Management Center's housing provident fund personal loan rates and fund utilization rates have always been high, so they do not meet the conditions for opening commercial to public provident fund loan businesses.