Different people have different opinions on interest rate trends, and their calculation methods have their own advantages.
What impact does the "change of anchor" mortgage interest rates have on us?
Make up the down payment, borrow money to buy a house, and mortgage interest rates are topics of great concern to home buyers.
Recently, the Industrial and Commercial Bank of China, China Construction Bank and other banks have successively issued announcements stating that, starting from August 25, batch conversion of eligible personal housing loans that have not yet undergone pricing benchmark conversion will be adjusted to the loan market quoted interest rate ( LPR) pricing. Loan customers can independently switch through designated channels or choose to implement the original interest rate pricing model. According to the central bank’s previous announcement, the conversion work should be completed before August 31 this year in principle.
Mortgage interest rates "change anchor", follow or not? It's time for buyers to "choose one".
Mortgage interest rate from fixed to floating
The choice of loan interest rate affects the monthly payment.
Previously, residents' loans to buy houses mainly referred to the benchmark lending interest rate issued by the central bank, and then the lending bank gave a certain degree of preferential treatment. In August last year, the central bank reformed and improved the mechanism for forming the market price rate for loans (LPR). Subsequently, the pricing benchmark for newly issued commercial personal housing loans was converted to LPR, and this year it was extended to stock mortgages.
Most people are new to "LPR". It is understood that it is calculated by 18 banks, including large, medium and small banks, based on their loan interest rates to the best customers, plus points based on open market operating interest rates, and then calculated by the National Interbank Funding Center. LPR includes two varieties of 1 year and 5 years or more. Each quotation bank shall submit quotations to the National Interbank Funding Center before 9 o'clock on the 20th of each month (postponed on holidays) in steps of 0.05 percentage points. The National Interbank Funding Center calculated the LPR based on the arithmetic average after removing the highest and lowest quotations and rounded to the nearest integer multiple of 0.05%, and announced it at 9:30 on the same day.
Compared with the more fixed benchmark lending rate, fluctuations in the market are a significant feature of LPR. Judging from the latest data released on August 20, the 1-year LPR is 3.85%, and the 5-year or more LPR is 4.65%, which has remained unchanged in the past 4 months.
This means that existing mortgage customers have to measure and predict between fixed and floating, immediate and long-term. Bai Yunfei, who is engaged in the financial industry, bought a house in Beijing three years ago with a mortgage term of 25 years. Although he used a provident fund loan and was not included in this "anchor change", he was still very concerned about this change. He calculated an account: Many fixed-rate customers in stock mortgages enjoy discounts, and most of the previous discounts were calculated on an annualized basis of 4.9%. According to the new policy, interest rates will fall by 39 basis points after the anchor is changed; however, if the fixed interest rate is 10% off, it is equivalent to a fall of 49 basis points. Therefore, the fixed interest rate that has enjoyed discounts may be more favorable for the moment, but LPR may be more cost-effective in the medium and long term.
In an interview with our reporter, Wan Zhe, a visiting researcher at the Chongyang Institute of Finance of Renmin University of China, said that the change in mortgage interest rates is rooted in the general background of interest rate market-oriented reforms, and this "anchor change" is the latest manifestation of this major process. "Discounting on the basis of a fixed interest rate is essentially a kind of floating, and LPR is a very important result of the interest rate market reform. It can be said that the mortgage interest rate is linked to the LPR, thanks to the interest rate market reform that has already been carried out. From the beginning of the transition Look, whether it is fixed-rate pricing or LPR pricing, the interest burden of home buyers will not change much, which is conducive to stabilizing market expectations.” She believes that in the process of deepening interest rate market reform, stock mortgages will “change anchor” to Gives customers more options.
The rational choice of house buyers
So, how do different home buyers view this "anchor change"? Do you choose to follow up?
Luo Chihao, who lives in Zunyi, Guizhou, bought a house in 2014. Recently, he checked a lot of information after seeing the news about the "anchor" of mortgage interest rates. He concluded that LPR is more appropriate. "In recent years, the country has implemented market-based interest rate reforms, and bank interest rates have fluctuated. As an important item of household expenditures, if housing loan interest is also adopted on the market with variable interest, it should be better integrated with economic trends. If surrounding relatives and friends borrow money to buy a house, I would recommend adopting an LPR pricing model that is more in line with policy trends and the direction of national regulation."
After graduating from Nankai University, Jia Ruijie from Henan moved to work in Hangzhou and Beijing. In 2017, she bought a house of her own in Hangzhou. Jia Ruijie told reporters that as early as April this year, she had already contacted the bank to convert the mortgage interest rate calculation method to LPR. "I have a mortgage balance of more than 1.5 million yuan, and the pressure of repayment is really not light. I am very concerned about the changes in mortgage interest rates. If a fixed interest rate is adopted, that is to say, the interest rate will always be fixed during the loan period; It will follow the market. In comparison, I think the long-term interest rate should continue to fall in the future, so it is more cost-effective to convert the mortgage to LPR." Jia Ruijie said.
However, some people choose to maintain a balance between fixed interest rates and LPR.
Li Chenglin, a young man born in the 90s, works in an Internet company in Hangzhou and currently has loans for two houses. Facing the "anchor change" of mortgage interest rates, after careful analysis, he decided to continue to use the original method to repay the loan and switch the mortgage interest calculation method to LPR in the other. Li Chenglin told reporters that he chose this way because one of the houses has a fixed interest rate plus a discount, which is more cost-effective, while the other has a fixed interest rate rise. Converting the latter to LPR can reduce some of the loan repayment pressure. "LPR is a floating interest rate, and it may go down or up. However, this interest rate is related to inflation and income levels. I think even if LPR goes up in the future, the income at that time will be higher than it is now. For someone with stable income For small families, the impact should not be great." Li Chenglin said.
In fact, after the batch conversion of mortgage interest rates is completed, customers who have objections to existing loans can negotiate with banks through various channels before the end of this year. Among them, ICBC and China Construction Bank also specially provide self-service transfer channels.
Speed up the process of "two tracks into one"
For most people, it is not easy to judge whether the long-term trend of interest rates is rising or falling. However, judging from recent interest rate trends, the market generally believes that short- and medium-term interest rates are more likely to fall. This has also become the real reason why many people actively choose to "change anchor."
"It's a bit like risk hedging. If you expect interest rates to fall in the future, choose LPR. If you think interest rates will rise, then choose a fixed interest rate. All in all,'anchor change' has more room for loan buyers." Wan Zhe said that in the global environment of low interest rates, the overall easing of the domestic money market will not be reversed. The probability of rising interest rates is significantly less than the probability of continuing to decline. There will be relatively more people who actively choose to link to LPR.
Xu Xiaole, chief market analyst of the Shell Research Institute, told this reporter that on the one hand, the transmission mechanism of the "two-track interest rate coexistence" has been steadily advancing in the past two years, and domestic financial institutions and the financial environment have already met the conditions for LPR conversion; on the other hand, housing loans It is an important part of loans. As of June 2020, the balance of personal home purchase loans accounted for more than 30% of the balance of medium and long-term loans. The transformation of housing loans from “anchor change” to LPR will accelerate the process of “two-track integration” of loan interest rates.
So, how should loan buyers plan? "The characteristic of a fixed interest rate is that the monthly repayment amount is fixed, and it is less or unaffected by external factors such as economic changes. During the mortgage repayment period, the customer group with relatively stable income and weaker ability to increase the monthly payment will tend to choose fixed Interest rate. LPR will fluctuate with the external economic environment, and the monthly repayment amount will also change. Customers whose monthly income fluctuates or whose monthly income is related to market interest rates will tend to choose LPR." Xu Xiaole said, if conditions permit and Provident fund loans are sufficient, and it is recommended that buyers give priority to provident fund loans or "commercial + provident fund" hybrid loans.
"If the loan time is taken into account, the current short-term interest rate decline is expected to be strong, the loan interest rate is higher, or the remaining repayment time is short, and customers with an early repayment plan can choose LPR first. For longer repayment periods, monthly For customers with relatively fixed income and low affordability for increased monthly payments, fixed interest rates can be given priority." Xu Xiaole said.