(Economic Watch) China lowers the lower limit of mortgage interest rates and property market confidence is expected to improve

  China News Agency, Beijing, May 15th: China's lower limit on mortgage interest rates is expected to improve confidence in the property market

  China News Agency reporter Pang Wuji

  The People's Bank of China and the China Banking and Insurance Regulatory Commission issued a notice on the 15th to adjust the differentiated housing credit policy. For households who take loans to buy ordinary self-owned houses, the lower limit of the interest rate of the first commercial personal housing loan is adjusted to not be lower than the market quotation rate of the loan of the corresponding period ( LPR) minus 20 basis points.

  what does this mean?

Can the real estate market "warm up"?

First home interest rate lower limit to 4.4%

  Mortgage interest rates in China refer to the LPR for a term of more than 5 years.

The LPR interest rate of more than 5 years released on April 20 this year is 4.6%. According to this policy, after the reduction of 20 basis points, the lower limit of the first home interest rate is reduced to 4.4%.

At the same time, the policy requires that the lower limit of the interest rate policy for commercial personal housing loans for second homes shall be implemented in accordance with the current regulations, that is, the lower limit standard of 5.2% (LPR + 60 basis points) is still implemented for the interest rate of second home loans.

  The reduction in the interest rate for the first home will reduce the cost burden of the just-needed homebuyers.

According to experts' calculations, if the lower limit of the city's policy and the specific interest rate implemented by the bank follow the national policy, the interest expense will be reduced when a household applies for a loan to buy the first ordinary home.

  Based on the loan amount of 500,000 yuan (RMB, the same below), the term of 30 years, and the repayment of equal principal and interest, the interest rate is reduced by 20 basis points, and the monthly payment expenditure can be reduced by about 60 yuan per month on average. In the next 30 years, the total interest expense will be reduced by about 2 million.

Not a direct "rate cut"

  It is important to note that this is not a direct rate cut.

This time, the lower limit of the commercial loan interest rate for the first home is lowered, which is to give local governments more control and autonomy.

  The determination of China's personal housing loan interest rate and down payment ratio follows the principle of city-by-city policy, and adopts a three-tier pricing mechanism at the national, city and bank levels.

According to the previous introduction by the central bank, taking the lower limit of interest rates as an example, the interest rate of the first home loan at the national level shall not be lower than the LPR of the corresponding period, and the interest rate of the second home loan shall not be lower than the LPR of the corresponding period plus 60 basis points. This is the lower limit policy that the whole country must comply with.

  Some places tend to add some points on the basis of the national interest rate lower limit according to their own real estate market conditions. Therefore, the first home loan interest rate quoted in most cities is higher than the 5-year LPR.

  According to the statistics of the Shell Research Institute, in April 2022, the mainstream first home loan interest rate in 103 cities will be 5.17%, and the second home loan interest rate will be 5.45%.

Among them, the first set of mainstream interest rates in Suzhou and Nantong dropped to the national lower limit of 4.6%.

  This means that after the release of the new policy, the purchase of the first self-owned house in Suzhou, Nantong and other cities is expected to be "one-step", and the mortgage interest rate will drop to 4.4%.

However, urban residents whose mortgage interest rates have not yet fallen to the national lower limit will not be able to enjoy the cost reduction brought about by "interest rate cuts" for the time being.

Helps boost market confidence

  Chen Wenjing, market research director of the Index Division of the China Index Research Institute, pointed out that after the adjustment of the national unified lower limit, the room for lowering the mortgage interest rate in various regions will be further opened. will.

  According to the monitoring data of the middle index, more than 100 cities across the country have optimized and adjusted their real estate policies more than 200 times this year. The pace and intensity of policy optimization have increased since April. The market is still in a period of deep correction.

Chen Wenjing said that the nationwide reduction of the lower limit of mortgage interest rates for first home buyers will play a positive role in current market expectations and will also bring substantial benefits to the market.

  Wang Xiaoqiang, chief analyst of Zhuge Housing Data Research Center, also said that the current epidemic in many places has repeatedly impacted the development of various industries, the real estate market lacks confidence, and residents' purchasing power has declined.

The central bank's substantial credit easing policy, on the one hand, lowered the threshold for residents to buy houses, on the other hand, it also boosted market confidence.

Keep the bottom line of "housing, not speculation"

  Li Yujia, chief researcher of the Housing Policy Research Center of the Guangdong Provincial Planning Institute, pointed out that it is worth noting that this policy only lowered the lower limit of the interest rate for the first home, and the second home has not been adjusted.

This is because the policy orientation has not changed. We do not want real estate to absorb too much funds from the society, nor do we want social funds to flow into the property market too quickly, which demonstrates the fundamental principle of housing, not speculation.

At the same time, it also sends a signal that the financial bailout policy is differentiated and has a bottom line, and its purpose is to stabilize the market rather than re-stimulate the property market.

(Finish)