How does the LPR release in December affect the monthly mortgage
year? After the two "interest rate cuts" this year, the monthly payment for one million loans can save about 90 yuan; batch conversion of users can be changed before the end of the year
On December 21, the Central Bank authorized the National Interbank Funding Center to publish data that the 1-year LPR (loan market quote rate) is 3.85%, and the LPR over 5-year is 4.65%.
Both of these figures were unchanged from the previous month and remained unchanged for eight consecutive months.
According to the regulations of the central bank, from March to August this year, the stock of commercial housing loan pricing benchmarks will be promoted smoothly. Those with commercial housing loans can choose between a fixed interest rate and LPR.
Since the repricing cycle of most stock mortgages is one year and the repricing date is January 1 of each year, the LPR quotation in December this year is related to the monthly payment changes of the "home loan family" throughout the next year.
How does LPR affect monthly payment?
Two "rate cuts" during the year, a monthly loan of one million can save 90 yuan
The "anchor" of mortgage pricing has always been the benchmark interest rate, which will be "discounted" or "floated" based on the benchmark interest rate.
After the reform of the LPR quotation mechanism was launched in August 2019, the central bank notified that the "mortgage family" with existing commercial housing loans would need to choose between LPR and fixed interest rates from March 1 to the end of August this year.
In fact, the selection does not take effect immediately after the conversion, it depends on the "repricing date".
It is understood that the current repricing cycle of most stock mortgages is one year, and the repricing date is January 1 of each year.
Therefore, the LPR quotation in December this year is related to the monthly payment of these people for the whole year next year.
Since most mortgages have a maturity of more than 5 years, referring to an LPR of more than 5 years, a mortgage loan of 1 million loan principal and 30 years of equal principal and interest, for every 5 basis points reduction in LPR, the buyer's monthly payment can be reduced by about 30 yuan, a total of 30 years of energy The interest is reduced by about 10,800 yuan; if the interest rate is cut by 10 basis points, it is equivalent to a monthly interest rate cut of 60 yuan, and a total savings of 21,600 yuan.
This year, LPR "cut interest rates" twice in February and April. LPR with a maturity of more than 5 years has fallen by 15 basis points, and the cumulative monthly mortgage payment for one million mortgages can save about 90 yuan.
Why continue to "stand still"?
Economic "V-shaped" reversal, policy interest rate cuts come to an end
Regarding the fact that the LPR has remained unchanged since the reduction in April, Wang Qing, chief macro analyst at Oriental Jincheng, said that this is mainly due to the “V-shaped” reversal of the macro economy since the second quarter, the countercyclical adjustment measures no longer increase, and the monetary policy has entered Observation period.
On the one hand, from the perspective of the willingness of quoting banks, the recent interbank deposit certificates and other medium-term market interest rates have remained high, which to some extent offset the impact of the decline in the cost of liabilities such as bank structured deposits and large certificates of deposit.
The average marginal cost of funds of banks is difficult to see a significant decline, and the quotation bank has insufficient motivation to lower the December 1-year LPR quotation.
On the other hand, since May, the policy-based interest rate cut has come to an end, and the supervisory authorities have turned to promote the financial system to reduce the burden on the real economy by 1.5 trillion yuan, prevent flooding from flooding, and focus on the implementation of targeted drip irrigation for manufacturing, small and medium-sized enterprises.
Banks can lower the "plus" part of the corporate loan interest rate pricing to reduce the actual financing costs of companies and alleviate the need to lower the LPR quotation to promote the downward trend of corporate loan interest rates.
Previously, ICBC, Agricultural Bank of China, Bank of China, China Construction Bank and many other banks announced that they will convert stock mortgages that have not been converted to LPR in batches before the end of August.
Regarding the bank’s approach, market participants said that first, the end of August is the limit for the "anchor change" of existing commercial mortgages; second, for banks, mortgage interest rates are closer to the market level, which is conducive to avoiding risks. Banks hope to deepen interest rates. Market-oriented reforms further promoted the use of LPR, and more loans were converted to LPR pricing.
How to repay the mortgage more cost-effectively?
LPR is "on the market", and those who are batch converted will have another chance to choose before the end of the year
The converted loan bonus value is equal to the difference between the latest execution interest rate of the original contract and the corresponding period LPR issued in December 2019, and the bonus value is fixed during the remaining period of the contract.
Customers who have objections can negotiate with the bank through various channels before the end of this year.
As of now, there are less than 10 days left this year, and those who are "bulk-converted" still have another chance to choose. Is it more cost-effective to choose LPR or a fixed interest rate?
Take Ms. Zhou, a house buyer in Beijing, for example. She bought a house in 2016 because it was the first set. At that time, she enjoyed a 15% discount on the benchmark loan interest rate (4.9%), and the actual implemented interest rate was 4.165%.
If Ms. Zhou chooses the LPR floating interest rate, first calculate the plus point value, which is 4.165% (current interest rate level) -4.8% (LPR in December 2019) = -0.635%, that is, Ms. Zhou's mortgage interest rate is "LPR minus 63.5 Basis point".
Since then, this plus or minus point will remain unchanged, and the mortgage interest rate will change with changes in the LPR over 5 years until the mortgage is repaid.
Taking a closer look, Ms. Zhou’s loan repricing date is January 1st of each year. According to the latest quotation in December, the LPR quotation (4.65%) for LPRs over 5 years is still unchanged, and the loan interest rate she can enjoy next year is 4.65%-0.635%=4.015%.
If Ms. Zhou chooses a fixed interest rate, then the current execution interest rate will remain unchanged and will not be affected by changes in the LPR interest rate, which is still 4.165%.
Yuan Chengjian, vice president of Zhuge Finding Real Estate, analyzed that the fixed interest rate is fixed for a long time, and the method of adding points based on the LPR as the pricing benchmark is "on the market" for users, and they can enjoy the lower repayment amount brought about by the lower interest rate, but the interest rate is also rising. The repayment amount will also increase accordingly.
Judging from the current situation, the LPR floating interest rate seems to be slightly lower temporarily, but it cannot be generalized because the LPR floating interest rate changes dynamically.
If you are optimistic about the probability that the LPR interest rate will decrease in the future, you can choose to switch to the LPR floating interest rate, otherwise you can continue to choose a fixed interest rate.
Regarding whether the early repayment will be affected, the industry believes that the overall impact of early repayment is not significant. Based on the cumulative decline of 15 basis points in the LPR over 5 years this year, the difference between before and after the monthly payment of a million mortgage is only about 90 yuan, which reflects The principle of smooth transition.
In addition, this year’s 1-year LPR has accumulated a downward trend of 30 basis points. In contrast, the downward rate of LPR over 5-years has been slower, which is consistent with the overall tone of “housing and living without speculation”.
Zhang Dawei, chief analyst of Centaline Property, told Shell Finance reporter that early repayments are all idle funds. If there are other investment channels with higher returns, early repayment is not appropriate. If there are no investment channels, it is appropriate to pay in advance.
How big is the room for interest rate cut next year?
It is expected that the probability of a full RRR cut and interest rate cut is unlikely, and a targeted RRR cut is not ruled out
According to the central economic work conference released last Friday (December 18), the macro policy next year must maintain continuity, stability and sustainability.
It is necessary to continue to implement a proactive fiscal policy and a prudent monetary policy, maintain the necessary support for economic recovery, and make policy operations more precise and effective, without making a sharp turn, and grasp the timeliness and effectiveness of policies.
"The current direction is to suspend interest rate cuts and tighten margins. Next year, the tone will follow this, and the tone will no longer be loose. Of course, not making a sharp turn means that there will be no sudden tightening." Such as Zhu Zhenxin, Executive Dean of the Institute of Finance Said.
Tang Jianwei, chief researcher at the Bank of Communications Financial Research Center, believes that monetary policy easing will not increase, but it will not turn to tightening soon. The central bank will still maintain reasonable ample market liquidity through policy tools such as open market operations.
In terms of specific policy tools, it is expected that the probability of a comprehensive RRR cut and interest rate cut is not high, but it does not rule out that there is still the possibility of targeted RRR cuts and liquidity to support small, medium and micro enterprises and the manufacturing industry.
It is worth mentioning that the annual Central Economic Work Conference reiterated that "housing and housing should not be speculated."
Huang Wenjing, a macro analyst at CICC, said that monetary policy is mainly to strike a balance between preventing debt expansion and avoiding credit crunch.
After a period of supervision, if the local overheating risk of the property market next year can be effectively controlled, interest rates are unlikely to rise further on the current basis, and the spontaneous "tight credit" caused by rising credit risks may require "loose money." Come to hedge.
Beijing News reporter Cheng Weimiao