The one-year LPR was further reduced to below 4% for the first time, and the
five-year period was reduced by more than 0.1%, both of which were the largest declines since August last year.
Yesterday, the LPR released by the central bank showed that the one-year LPR (loan market quoted interest rate) was 3.85%, down 20 basis points from the previous month (1 basis point = 0.01%); the LPR over five years was 4.65%, compared with the previous month Decrease by 10 basis points. It is worth noting that this is the fourth reduction in the one-year LPR and the third reduction in the five-year LPR since the creation of the new LPR mechanism in August last year, but they both recorded the largest declines, and the one-year LPR fell to 4 %the following. However, because the central bank reversed the repurchase and the MLF interest rate has been lowered by 20 basis points before, and it also superimposed operations such as directional RRR cuts, yesterday's reduction in LPR was as early as market expectations.
On March 16, the inclusive reduction of Pratt & Whitney Financial officially landed, and the joint-stock banks had conditional targeted reduction of 1 percentage point. The interest rate of MLF operations routinely carried out by the central bank on the same day has not been reduced, resulting in the LPR released on March 20 also not being reduced.
Ma Jun, member of the Central Bank ’s Monetary Policy Committee, explained at the time: “There is a threshold for the overall reduction of LPR, that is, the average value of the effective quotation of each quotation bank changes by 5 basis points before the final LPR is adjusted.” Thereafter, March 30 On April 15th, the central bank held reverse repurchase and MLF operations, and the interest rate was reduced by 20 basis points, which was regarded by the market as the weather vane for the April LPR to be reduced synchronously.
On April 17th, the Politburo meeting of the CPC Central Committee proposed "using quasi-reduced interest rates, interest rates, re-loans and other means to maintain reasonable and sufficient liquidity and guide the loan market interest rate downward. This statement was considered by the market to be the most obvious sign of LPR's decline yesterday. Guo Lei, chief economist of GF Securities, said that the expression of “rate cut” directly appeared in the Politburo meeting of the CPC Central Committee, showing that the policy attaches importance to the use of interest rate instruments to reduce the cost of physical financing and drive the tendency of marginal investment.
CCB Investment Consulting analyst Wang Quanyue said the central bank's intention to guide LPR decline through "reverse repurchase-MLF" is obvious. Since the central bank "improved the LPR formation mechanism" in August last year, except for September 2019, all the 1-year LPR reductions have been in line with the "reverse repurchase-MLF-1 1-year LPR" equivalent reduction "customary". When LPR fell in February, the 5-year LPR fell by 5 basis points, which was weaker than the 10 basis points of reverse repurchase and MLF decline in the current period. The main reason was the long-term capital cost of commercial banks. In March and April, the two RRR cuts released about 750 billion of funds. In May, there will be the third step of the second RRR cut. The long-term capital cost of the bank has further decreased, so the April 5-year LPR Decrease by 10 basis points.
Dispel doubt
Will real estate regulation be fully relaxed?
On April 15, at the same time as the targeted RRR cut, the central bank announced the implementation of a medium-term lending facility (MLF) operation of 100 billion yuan, and the winning bid rate was 2.95%, which was 20 basis points lower than the previous time.
At the time, Wen Bin, chief researcher of Minsheng Bank, said that from the perspective of the LPR quotation mechanism and previous changes, it is expected that the 1-year LPR quotation on April 20 will be in line with the MLF interest rate reduction by 20 basis points. At the same time, in order to maintain the stability and continuity of the real estate market regulation policy, LPR over 5 years may fall by 10 basis points to 4.65%.
Regarding the reduction of LPR by more than 10 basis points over the five-year period, Wang Jin, chief macro analyst of Dongfang Jincheng, said that after the epidemic impact period is lengthened, it will exert greater downward pressure on the domestic real estate industry, and under the prospect of external demand being blocked, The leading role of the real estate industry in domestic consumption and investment needs to be further enhanced. "It can be seen that some areas are increasing their support for housing companies recently, but there is a 'one-day trip' to loosen sales restrictions in many places. At this stage, it is unlikely that the real estate control will be fully relaxed, but a moderate reduction in mortgage interest rates or Support policy choices in the real estate market. "
"LPR over five years is the pricing benchmark for loans over five years, and individual loans for loans over five years account for a relatively high proportion. The asymmetric decline will release the signal that real estate regulation is not relaxed." Dong Ximiao, principal researcher of New Net Bank Emphasize.
Zhang Dawei, chief analyst of Centaline Real Estate, analyzed that this is an asymmetric interest rate cut. The 5-year LPR has only been reduced by 10 basis points, indicating that the orientation of financial policy is to stabilize the real estate market and revitalize the real economy. The real estate market regulation policy will not be greatly relaxed.
Will it affect the stock floating interest rate mortgage?
On March 1 this year, the conversion of the benchmark for the stock pricing of individual housing loans officially kicked off. For those who have a mortgage, they can choose to convert the interest rate pricing method stipulated in the original contract to a floating interest rate formed by LPR plus points, or they can choose to convert to a fixed interest rate.
For customers who choose LPR plus a bit of floating interest rate, according to the contract of most banks, the interest rate in 2020 will remain unchanged, and the new interest rate will take effect next year. If LPR maintains a downward trend, every change this year will have an impact on the mortgage rates of these customers next year.
According to Zhang Dawei's calculations, for a 30-year mortgage of 1 million yuan, for every 5 basis points of interest rate reduction, the monthly payment can be reduced by about 30 yuan, and the total interest for 30 years can be reduced by about 10,800 yuan. The interest rate cut this time by 10 basis points is equivalent to a reduction of 60 yuan per month, a total savings of 21637 yuan.
Zhang Dawei's analysis believes that the number of accumulated housing loans nationwide is estimated to have exceeded 30 trillion. In the future, most of the stock mortgage interest rate will be linked to LPR. It is expected that these 30 trillion stock loans will be directly affected by this interest rate cut next year. According to preliminary calculations, it will save 30 billion yuan a year in interest for all stock buyers in the country.
How much room to cut interest rates in the future?
Data shows that since the LPR reform in August last year, the 1-year LPR has been reduced by a total of 35 basis points, and the 5-year LPR has been reduced by a total of 20 basis points. Next, will LPR continue to go down?
On April 16, the central bank stated that it will continue to guide credit funds to support the development of the real economy, especially small and micro enterprises, through policy measures such as targeted RRR cuts and re-loans. The Politburo meeting on April 17 made it clear that "use of RRR cuts, interest rate cuts, re-loans and other means to maintain reasonable and sufficient liquidity, and guide the loan market interest rates down." Therefore, the market generally expects that there will be room for RRR cuts in the future. Reverse repurchase and MLF interest rates will be further lowered. It is not even ruled out that the deposit benchmark interest rate will also be lowered, which will guide LPR down.
Zhu Jianfang, chief economist of CITIC Securities, said that the subsequent open market operations (OMO) and MLF interest rates are expected to fall by about two times, with about 15 basis points of room for decline, further driving LPR interest rates to fall.
Wang Qing said that considering the impact of overseas epidemics on the Chinese economy, the domestic macro-policy counter-cyclical adjustment time may be correspondingly longer, and the adjustment will be further increased. The current policy interest rates, including the MLF interest rate, are still much higher than the zero interest rate level. In the future, the year-on-year increase in CPI is expected to decline in a trend. It is expected that the rate cut cycle will continue until the end of the year. After April, the MLF interest rate will still have about 30 basis points to be lowered.
This article / Reporter Cheng Jie