Chinanews.com client, Beijing, August 21st (Reporter Li Jinlei) "Choose one of two" mortgage interest rates enters the countdown! The loan market quote rate (LPR) released on August 20 continued to "stand still." Choosing a fixed interest rate or LPR has become the most tangled thing for these day home loan families.
Data map: A bank staff counts currency. Photo by China News Agency reporter Zhang Yun
LPR remained unchanged in August
The People's Bank of China authorized the National Interbank Funding Center to announce that on August 20, 2020, the loan market quoted interest rate (LPR) will be 3.85% for 1-year LPR and 4.65% for 5-year or longer LPR. This is the fifth consecutive month that LPR has maintained this level since April this year.
Why has LPR been "standstill" recently?
Wen Bin, chief researcher of China Minsheng Bank, told a reporter from Chinanews.com that as the epidemic prevention and control has achieved remarkable results and the macro economy has stabilized and rebounded, monetary policy has returned to normal, from the previous loose total volume to the current emphasis on structural optimization.
"On the one hand, more companies are getting out of the predicament and gradually starting to operate normally. Monetary policy needs to provide more precise support; on the other hand, continuous easing of total volume can easily cause idle arbitrage of funds and cause risks such as overheating of the local real estate market." Bin said that from the perspective of recent monetary policy operations, one can also appreciate the central bank’s cautious attitude towards monetary policy easing. This month’s reverse repurchase and MLF operations, and related interest rates have remained unchanged, conveying the fact that LPR will not drop this month. signal.
Huang Yiping, deputy dean of the National Development Research Institute of Peking University, believes that the LPR has not been adjusted in recent months. On the one hand, it is a reflection of the central bank’s normal monetary policy concept. On the other hand, the economy has rebounded in the second quarter and there is room for extremely loose monetary policy. Very small.
Data map: Property consultants recommend commercial housing types to the public. Photo by China News Agency reporter Wei Liang
Home loan interest rate "choose one" countdown
Although LPR has not changed in the past few months, this unfamiliar and professional term has recently become familiar to the majority of mortgage families, because they are faced with the choice between fixed and LPR interest rates.
The undecided and hesitant mortgage families have recently become more nervous because of a notice from the bank. The five major banks recently issued an announcement stating that starting from August 25, batch conversion of personal housing loans that meet the conditions and have not yet undergone pricing benchmark conversion will be carried out in batches, and will be uniformly adjusted to the loan market price rate (LPR) pricing.
According to the previous announcement of the central bank, the conversion work will start on March 1, 2020, and in principle should be completed before August 31, 2020.
"I finally chose LPR." Mr. Zhang, a Beijing resident who struggled for a few days, told a reporter from Chinanews.com: "My mortgage is 30 years and the interest rate is about 5.6%. I may change my house in the future and enjoy the current one first. The bonus period. In case the LPR rises in the future, you can try to pay it back or sell the house."
From the official account of the central bank.
Which is better, LPR or fixed interest rate?
After choosing a fixed interest rate, your mortgage interest rate is to maintain the current interest rate level unchanged, not affected by changes in LPR. Choosing LPR, your mortgage interest rate will change with LPR in the future, which will affect the monthly payment. If LPR goes down, the repayment amount will decrease, but if LPR goes up, the repayment amount will also increase.
The central bank previously explained that the two conversion methods have their own advantages, and the specific choice depends on their own judgment, especially the judgment of future interest rate trends. If it is believed that LPR will fall in the future, then it will be better to switch to reference LPR pricing; if it is believed that LPR may rise in the future, then it will be advantageous to switch to a fixed interest rate.
In Wen Bin's view, choosing fixed or floating is indeed very tangled. It is understood that most people have chosen floating, which is also because everyone has clearly enjoyed the benefits of LPR decline. This time the mortgage interest rate conversion is based on the LPR plus or minus points in December last year, while the LPR in December last year was 4.8%, and mortgages with a maturity of more than five years were 4.8%, and it has now fallen to 4.65%.
Wen Bin pointed out that if the loan period is relatively short and the previous mortgage interest rate is relatively high, LPR can be chosen. And if the term is relatively long and the loan interest rate itself was very low before, you can actually choose a fixed mortgage interest rate. Because this can lock in the cost of monthly payments, and better arrange the income and expenditure of individual families in the future, without affecting normal living arrangements due to changes in mortgage interest rates.
How about the actual selection? According to media reports, a relevant person from China CITIC Bank stated that the conversion rate of the bank's personal stock loan pricing benchmark exceeded 80%, and more than 90% of converted customers chose the LPR floating pricing model.
Statistics show that since August last year, the LPR of more than 5 years linked to the interest rate of personal housing loans has dropped from 4.85% in the first period to the current 4.65%.
From the official account of the central bank.
Will the monthly payment change every month after switching to LPR?
LPR is announced once a month. Netizens are concerned, will personal loan interest rates change every month? Will the monthly repayment amount change?
Not really. According to the central bank’s previous announcement, the shortest repricing cycle for conversion to LPR is one year (interest rates are adjusted at least once a year), so there will be no monthly adjustments.
ICBC also explained that for LPR floating rate loans, repricing is carried out according to the repricing cycle agreed in the contract. For example, if your loan issuance date is May 1, 2010, if the contractual repricing cycle is 1 year, then On May 1 of each year, adjustments will be made in accordance with the latest corresponding period of LPR. Except for the repricing date, changes in LPR have no impact on loan interest rates.
Did you choose a fixed interest rate or LPR? (Finish)