Chinanews.com, March 4th. From March 1st, the mortgage lenders have to choose whether to change the mortgage rate to a fixed rate or an LPR floating rate. The central bank issued a conversion calculation explanation on the official WeChat public account on the 4th. If the repricing date is the corresponding day of the loan issue, then according to the conversion announcements of most banks, if the conversion is made before the repricing date, the 2020 repricing date can be referred to. The newly released LPR determines the interest rate; if it is converted after the repricing date, it is necessary to wait until the 2021 repricing date before referring to the newly issued LPR to determine the interest rate.

How to count points?

According to the People's Bank of China [2019] Announcement No. 30, after converting the mortgage pricing benchmark to LPR, the value added should be equal to the difference between the latest execution interest rate of the original contract and the LPR in December 2019 (which can be negative). In the past, floating rate loans were generally determined by floating a certain percentage of the benchmark interest rate of the loan. So what are the conversion points for interest rates under different floating ratios?

For example, the borrower Xiao Wang, when buying a house, enjoyed a 10% discount on the benchmark loan interest rate (down 10%). The loan date is August 1, 2015, and the term is 20 years.

If Xiao Wang chooses to convert the pricing benchmark of this home loan to LPR, the current 5-year loan benchmark interest rate is 4.9%, and the actual execution rate before conversion is 4.9 × (1-10%) = 4.41%. LPRs with a 5-year term or more released in December 2019 were 4.8%. According to the principle that the interest rate at the time of conversion remains unchanged, the addition and subtraction points of Xiaowang's mortgage are -0.39% = 4.41% -4.8%, which means a reduction of 39 basis points.

After that, until the mortgage repayment is completed, the addition and subtraction points will remain unchanged, and the mortgage interest rate will change with the change of LPR over 5 years. The points of addition and subtraction for other common floating ratios are shown in Table 1.

What interest rate is paid each month after conversion? What is the impact of choosing a different conversion point?

First, understand three concepts:

Conversion time: The time to convert the personal home loan pricing benchmark to LPR (between March 1 and August 31, 2020). During the conversion, you and the bank need to negotiate to determine: First, add and subtract points, the specific calculation method see the first part; second, re-pricing day and re-pricing cycle.

Repricing date: It refers to the time when the loan execution interest rate is recalculated according to the latest pricing benchmark (the benchmark interest rate before conversion and the LPR after conversion). Generally, it is January 1 of each year, or the date corresponding to the loan release date each year.

Repricing cycle: The cycle of re-determining the execution rate. If the mortgage rate changes every year, the repricing cycle is one year.

After the pricing benchmark is converted to LPR, the interest rate will not change before the first repricing date, and it may only change with the then LPR from the first repricing date. The repricing date and repricing cycle can be implemented in the original contract, and can also be renegotiated by the borrower and the lender. The repricing period for the refinancing of the house loan is at least one year.

If the repricing date is January 1 of each year, then at any point between March and August 2020, the interest rate in 2020 will be consistent with the original contract interest rate. From January 1, 2021, the rate will be 2020. The LPR in December is used as the benchmark plus and minus points to determine the interest rate for the current year, and so on for subsequent years. If the repricing date is the corresponding date for the annual loan issuance, according to the conversion announcements of most banks, if the conversion is made before the repricing date, the 2020 repricing date can refer to the latest published LPR to determine the interest rate; the conversion will take place after the repricing date. , You need to wait until the repricing date in 2021 before you can determine the interest rate with reference to the latest LPR release.

Continuing the previous example, assuming that the LPR for a 5-year period from March 2020 to July 2021 is 4.75% (the actual situation is likely to change, depending on the LPR quote at that time):

(1) If Xiao Wang ’s mortgage repricing date is January 1 of each year, there is no difference in the conversion from March to August 2020. Before January 1, 2021, his execution interest rate is 4.8% -0.39% = 4.41%, that is, LPR (4.8%) and fixed spread (-0.39%) over 5 years in December 2019; after January 1, 2021, it becomes 4.75% -0.39% = 4.36%, here 4.75% LPR over 5 years in December 2020; the rest of the year and so on.

(2) If the repricing date is the loan issuance date (that is, August 1 of each year), if Xiao Wang converts before July 31, 2020, and the conversion to July 31, the execution rate of this mortgage is 4.41%; After August 1, 2020, it will be 4.75% -0.39% = 4.36%. Here, 4.75% is the LPR of 5 years or more in July 2020; and so on.

If Xiao Wang converts after August 1, 2020, the execution rate of this mortgage will remain unchanged at 4.41% until July 31, 2021; the implementation of 4.75% -0.39% = 4.36 will only begin on August 1, 2021 The interest rate of%, 4.75% here refers to the LPR of 5 years or more in July 2021; the subsequent years and so on. (See Table 2 for details)