Choose LPR or fixed interest rate? Two key points
According to the central bank's regulations, from March 1 to August 31, commercial banks will switch the pricing benchmarks of stock floating-rate loans. On the one hand, the real estate market has been slowly warming up recently, on the other hand, local regulatory efforts have been strengthened. The reporter's investigation found that in this context, more buyers with existing loans tend to convert existing mortgages into LPR pricing. Industry analysts say that with the conversion of stock mortgages to LPR pricing, mortgage interest rates are likely to be oriented towards low interest rates, which will help real estate companies destock in the second half of this year.
Low interest rate expectations
Promote the "change anchor" of mortgage interest rates
Mr. Wang, a Shanghai citizen, recently completed relevant operations through the mobile banking app of a state-owned bank, converting the mortgage interest rate from the previous fixed interest rate to LPR pricing. The entire conversion process took only a few minutes.
Mr. Wang said that he bought a house in 2014 with a total loan of 850,000 yuan. At that time, the loan was calculated based on the benchmark interest rate of 4.9% and the monthly repayment was more than 4,500 yuan. "The bank notified that if it wants to switch to LPR pricing, it must be completed before August 31." Mr. Wang said that after understanding the relevant policies, he believes that in the long run, LPR pricing will lead interest rates down.
Since August last year, the People's Bank of China has issued 12 LPRs, and the LPR linked to personal housing loan interest rates for more than 5 years has dropped from 4.85% in the first period to the current 4.65%. Since this year alone, the LPR over 5 years has been lowered twice, a cumulative reduction of 15 basis points from the end of last year.
The People's Bank of China issued an announcement at the end of last year, stating that from March 1 to August 31, 2020, the pricing benchmark for stock floating-rate loans will be converted. Customers can negotiate with financial institutions to decide whether to "change anchor" to LPR or choose a fixed interest rate. The reporter's interview found that considering that interest rates still have room for further downside, many people choose to convert existing mortgages to LPR pricing.
The monitoring data of Rong360 on the mortgage interest rate of 674 bank branches in 41 key cities across the country showed that in July (the data monitoring period is from June 20 to July 17), the average interest rate of the first home loan in the country was 5.26%, a decrease from the previous month. 2BP; the average interest rate of second home loans was 5.58%, a month-on-month decrease of 2BP.
According to the monitoring data of Rong360, the national first home loan interest rate dropped by 28BP compared with the end of last year, and the second home loan interest rate dropped by 27BP compared with the end of last year. The decline was far more than the 5-year LPR decline.
The People's Bank of China authorized the National Interbank Funding Center to announce that on July 20, the loan market quoted interest rate (LPR) was 3.85% for one-year LPR and 4.65% for LPR over five years, the same as last month.
How to choose?
Look at risk tolerance and remaining maturity
Should we choose fixed interest rate or LPR? The key depends on the lender's risk tolerance and remaining repayment period.
If your mortgage does not have a few years left, it is actually a good judgment. “Customers with a repayment period of about five years can basically choose LPR decisively. Short-term interest rates are better to judge. In recent years, interest rate cuts are a general trend. With LPR going down, the annual repayment amount will be less." The personal loan manager of a joint-stock bank said.
Since December last year, the interest rate of LPR over 5 years has been lowered twice. This means that even if the LPR interest rate is not lowered in the next few months, lenders who choose LPR will have a lower mortgage interest rate next year and the amount of loan that needs to be repaid will also decrease.
But if you are more stable and pursue stability, you can choose a fixed interest rate. "Many lenders still have ten to twenty years of mortgage loans. There will be many disturbing factors in the middle. Long-term interest rates are difficult to predict. Because it is not ruled out that the second half of the mortgage repayment will usher in an economic upward cycle. Probably, this will cause the LPR to rise accordingly.” The personal loan manager said, especially for some customers who took a lower mortgage interest rate and discounted them, they can choose not to switch and maintain a fixed interest rate. There is nothing wrong with being safe.
Comprehensive Xinhua News Agency and Metropolis Express
choose fixed interest rates
That is, the mortgage interest rate you signed with the bank before will be used, and there will be no change in the future repayment cycle.
Choose LPR interest rate
It is necessary to perform a conversion based on the LPR value of more than 5 years in December 2019 to determine the number of points to be added. Afterwards, the calculation of the mortgage interest rate for each repayment cycle will be changed to the "LPR + point" method. The point value will not change, and the LPR part will be updated based on the LPR value of the previous month on the repricing date each year.