Chinanews client, Beijing, December 20th (Zuo Yukun Gong Hongyu) After 20 months, LPR dropped again.
The People's Bank of China authorized the National Interbank Funding Center to announce that on December 20, 2021, the quoted interest rate (LPR) of the loan market is 3.8% for 1-year LPR and 4.65% for 5-year or longer LPR.
The data shows that compared with the previous period of LPR, the 1-year LPR decreased by 5 basis points, and the LPR above the 5-year period remained unchanged.
Prior to this, since April 2020, LPR has remained unchanged for 19 consecutive months.
What impact does LPR’s “interest rate cut” have on companies and home buyers?
The screenshot is from the official website of the Central People's Bank.
Decrease in 1-year LPR, lowering the financing cost of the real economy
"With the MLF (Mid-Term Loan Facility) interest rate remaining unchanged, the decline in 1-year LPR reflects that banks continue to increase their support for reducing the financing costs of the real economy, and the potential for interest rate reform in the loan market to continue to be released." China Minsheng Wen Bin, the bank's chief researcher, told Chinanews.com.
"This one-year LPR decline is mainly due to the decrease in the bank's capital cost, which reached the smallest step of the spread pressure." Wen Bin analyzed that since this year, banks have strengthened the management of the debt side, and the innovative deposits, Internet deposits, and structured deposits have been strengthened. Regulations have reduced the overall cost of liabilities of banks.
In particular, the two consecutive RRR cuts in July and December further optimized the bank’s capital structure and reduced the bank’s cost of debt.
"At present, our economy is still facing the triple pressure of demand contraction, supply shocks and weakening expectations. At this time, lowering the LPR interest rate will help financial institutions further reduce the financing costs of the real economy and play a counter-cyclical role in monetary policy. Keeping the economy running smoothly and healthy will help the economy operate within a reasonable range." Wen Bin said.
Dong Ximiao, the chief researcher of China Merchants Finance, also believes that the decline in 1-year LPR is to promote the decline of short- and medium-term loan interest rates and reduce the financing cost of the real economy; LPR above 5-year remains unchanged, mainly because it does not send a loose signal to the real estate market.
"This also shows once again that the orientation of the prudent monetary policy has not changed. The next step will be to make the monetary policy more flexible and appropriate through fine-tuning and pre-adjustment." Dong Ximiao said.
Data map: Citizens pass by the People's Bank of China.
Photo by China News Agency reporter Zhang Xinglong
The 5-year LPR does not move, releasing the signal of real estate stability maintenance
By the end of the year, the adjustment period for mortgages is about to come.
Although the 1-year LPR declined, the 5-year LPR directly related to housing loans remained unchanged.
What impact will this have on the property market?
"The one-year LPR reduction will have a greater impact on the consumer market. For medium and long-term funds, there have been several downward adjustments during the epidemic last year. If the current downward adjustment continues, it may cause new problems, including asset prices. The problem of bubbles, the risk of a significant decline in the rate of return on investment in the financial market, the risk of increased inflationary pressures, etc., have not been adjusted downwards during the five-year period," explained Yan Yuejin, research director of the Think Tank Center of E-House Research Institute.
According to data released by the central bank, new personal housing loans were 348.1 billion yuan and 401.3 billion yuan in October and November, respectively, an increase of 101.3 billion yuan and 53.2 billion yuan respectively over the previous month.
Wen Bin believes that under the circumstance that the relevant credit needs are gradually being reasonably satisfied, the LPR over 5 years will remain unchanged, which will help maintain the virtuous circle and healthy development of the real estate market.
"The financing period of small and medium enterprises is generally within 5 years. The purpose of unchanged LPR for more than 5 years is to reduce the impact on mortgage interest rates. Although the 1-year interest rate cut will hardly affect home buyers, it is for developers with a tight capital chain. , To a certain extent, it can also alleviate financial pressure." Zhang Dawei, chief analyst of Centaline Real Estate, believes.
"And there has been a one-year interest rate cut, which represents the trend of overall credit policy easing, so the possibility of a subsequent five-year interest rate cut is not ruled out." Zhang Dawei said at the same time.
The data on mainstream mortgage interest rates in key cities released by the Shell Research Institute shows that in December, the housing loan environment in 103 key cities across the country continued to improve. The mortgage interest rate fell for three consecutive months, the lending cycle was shortened to less than two months, and the interest rate reduction space and the lending cycle were shortened. The time has been expanded compared with the previous month.
The improvement of the credit environment has a direct effect on market transactions.
Xu Xiaole, chief market analyst of the Shell Research Institute, believes that under the guidance of the "virtuous circle", the continuous improvement of the credit environment will bring benefits to market transactions at the end of the year and drive the repair of the bottom of the market.
Data map: The picture shows a corner of Chengdu, where the sun is rising from the east.
Photo by China News Agency reporter Liu Zhongjun
Will
LPR
continue to fall in 2022
?
The Central Economic Work Conference proposed "support the commercial housing market to better meet the reasonable housing needs of buyers, and implement policies in accordance with the city to promote a virtuous circle and healthy development of the real estate industry".
The China Banking and Insurance Regulatory Commission also emphasized that “focus on meeting the mortgage demand for first homes and improved housing”. The frequent warming of the policy has made the market full of expectations for the improvement of the real estate market environment.
Yan Yuejin believes that under the general environment of RRR cuts, the scale of banks' loanable funds will increase, and the abundance of funds will objectively make mortgage interest rates likely to be lowered, especially in the second quarter of next year.
"It is expected that the credit environment of the real estate market will further improve in the later period, and there is still room for optimization of mortgage interest rates and lending cycles in some cities. This will further promote market transactions at the end of this year and early next year to stabilize and rebound, and prices will gradually stop falling and stabilize after the transaction volume rebounds. "Xu Xiaole said.
"For home buyers, today's 1-year LPR rate cut is just the beginning." Zhang Dawei also believes.
On the whole, Wen Bin believes that taking into account the accelerated recovery of the economy in the first half of this year, a higher base has been formed, and the current downward pressure on the economy is transmitted backwards, which will put greater pressure on economic growth in the first half of next year. It may still be turned on.
"Under a sound tone, structural support will continue to be the main focus for stable growth." Wen Bin said that the central bank will mainly use a combination of open market operations and MLF and other monetary policy tools to maintain reasonable and adequate market liquidity; make better use of it. The role of structural monetary policy tools such as loans, carbon emission reduction support tools, and direct access to the real economy, encourages and guides commercial banks to increase credit in key support areas and weak links in the counter-cyclical fashion, promotes stable and moderate reduction of financing costs, and boosts the economy Run in a reasonable range.
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