Recently, interest rates on housing loans in first-tier cities such as Beijing, Shanghai, Guangzhou and Shenzhen have been lowered, arousing concern.

Previously, banks in more than 100 cities across the country had voluntarily lowered their mortgage interest rates, and "mortgage loans have fallen" has become a common phenomenon.

　　Industry insiders said that the current round of housing loan interest rate cuts is to reduce the cost of residents' debt, support reasonable housing demand, and stimulate consumer demand, thereby stabilizing economic growth and ensuring and improving people's livelihood.

All localities should adhere to the positioning of "housing for housing, not speculation", proceed from their own actual conditions, continue to improve differentiated housing credit policies, support rigid and improved housing needs, and jointly promote the steady and healthy development of the real estate market.

How the pricing mechanism works

　　This round of housing loan interest rate cuts are closely related to the loan market quoted rate (LPR).

　　On the one hand, the current 99% mortgage interest rate is linked to LPR with a term of more than 5 years, and the former changes due to the latter.

On the other hand, the mortgage interest rate has a three-tier pricing mechanism, and changes in each layer may trigger specific interest rate changes.

"Individual housing loan interest rates and down payment ratios are determined using a national, city, and bank three-tier pricing mechanism." The relevant person in charge of the People's Bank of China said recently.

　　How does the pricing mechanism work?

First, regulators give a "bottom" at the national level.

Previously, the "bottom" of the interest rate for the first home and the second home was LPR with a term of more than 5 years, and LPR with a term of more than 5 years plus 60 basis points; on May 15, the regulatory authorities jointly issued a notice that the "bottom" of the first home interest rate dropped to 5 The LPR over the term of the term will be reduced by 20 basis points, and the second housing will remain unchanged for the time being.

Secondly, each city adheres to the principle of city-specific policies, and decides how many basis points to add or not to add on the basis of the national "bottom" as the "bottom" of the city; finally, each bank takes into account its own operating conditions, customer risk status and other factors, It is up to you to decide how many basis points to add or not to add to the "bottom" of the city.

　　It can be seen that there are two main reasons for the reduction of mortgage interest rates in this round: First, the reduction of LPR with a term of more than 5 years, followed by a decline in mortgage interest rates.

On May 20, the LPR over 5 years fell from 4.6% to 4.45%.

"For the first time, the LPR quotation has only been lowered for products with a maturity of more than 5 years. This structural 'interest rate cut' will have a positive effect on stabilizing the total credit volume and boosting medium and long-term credit demand." said Wen Bin, chief researcher of China Minsheng Bank.

Second, each city and each bank will moderately adjust the previously large increase in points according to the actual local conditions and on the basis of not breaking the lower limit of the national interest rate, and some cities have adjusted the adjustment rate by more than 100 basis points.

1st, 2nd and 3rd tier cities are different

　　Although the mortgage interest rates have generally been lowered, the main reasons for the reduction in the first-, second-, and third-tier cities are quite different, and the rate of reduction is quite different.

　　Looking at first-tier cities such as Beijing, Shanghai, Guangzhou, and Shenzhen, the main reason for the reduction in mortgage interest rates is the decline in LPR with a term of more than 5 years, and the original increase rate has not changed significantly.

Among them, the interest rate for the first home in Beijing decreased from 5.15% to 5%, and the interest rate for the second home decreased from 5.65% to 5.5%, both reduced by 15 basis points, which is in line with the decline in the LPR with a maturity of more than 5 years; the first home interest rate of some banks in Shanghai decreased from 4.95% dropped to 4.8%, and the interest rate for second-home mortgages dropped from 5.65% to 5.5%; the first-home interest rates in Guangzhou and Shenzhen dropped to a minimum of 4.45% and 4.75%, respectively, which differed from bank to bank.

　　Why haven't the mortgage rates in first-tier cities dropped significantly?

This has to do with supply and demand in the real estate market.

The latest data shows that, regardless of the month-on-month or year-on-year, the sales prices of new commercial housing and second-hand housing in first-tier cities both rose in April.

"From a month-on-month perspective, the sales price of new commercial housing in first-tier cities rose by 0.2%, a decrease of 0.1 percentage points from the previous month; the sales price of second-hand housing rose by 0.4%, the same increase as the previous month." Sheng Guoqing, chief statistician of the City Department of the National Bureau of Statistics From a year-on-year perspective, the sales prices of newly-built commercial housing and second-hand housing rose by 3.9 percent and 2.4 percent, respectively, a drop of 0.4 percentage points from the previous month.

　　On the other hand, the housing demand in second- and third-tier cities has weakened recently, mainly for two reasons.

First, due to the continuous impact of the new crown pneumonia epidemic, many market entities are very difficult, residents' expected income has declined, and market demand has weakened; second, the first-home housing interest rates previously implemented in some second-tier cities were relatively high, some even exceeding 6%, which affected the purchase of houses to a certain extent. user needs.

To this end, some second- and third-tier cities have recently significantly lowered local mortgage interest rates on the basis of complying with the national interest rate lower limit.

A recent report released by the Shell Research Institute shows that compared with the high point in 2021, the mainstream loan interest rates for first home buyers in Zhengzhou, Wuxi, Mianyang, Meishan, Xinxiang and other places have generally been reduced by more than 150 basis points.

Support reasonable housing needs

　　The Politburo meeting of the Central Committee of the Communist Party of China held at the end of April pointed out that all localities should be supported to improve real estate policies based on local conditions, and support rigid and improved housing needs.

The symposium held a few days ago to stabilize growth and stabilize market players and ensure employment pointed out that it is necessary to stabilize land prices and house prices, support residents' reasonable housing needs, and maintain the stable and healthy development of the real estate market.

　　At present, it is very necessary to reduce the debt cost of residents.

"For existing housing loans, a drop in LPR with a maturity of more than 5 years will reduce the cost of housing loans, which is conducive to stabilizing real estate market expectations and promoting real estate sales. At the same time, the reduction of debt costs will also help promote the growth of residents' consumer demand." Wen Bin Say.

　　"It is expected that most banks will significantly reduce mortgage interest rates to better meet residents' housing consumption needs." Dong Ximiao, a part-time researcher at the Financial Research Institute of Fudan University, believes that under the circumstances of great downward pressure on the economy and insufficient demand for effective credit, housing loans are likely to reopen. Become a high-quality credit asset for various banks, which will intensify competition in the housing loan market.

　　It is worth noting that in order to better meet the reasonable housing needs of home buyers, we must focus on stabilizing land prices, housing prices, and stabilizing expectations, and implement differentiated housing credit policies based on city-specific policies.

"For cities with a long residential destocking cycle, the intensity and pace of policy adjustment can be moderately increased." Dong Ximiao said that for cities with relatively sufficient demand for housing purchases and expectations of rising house prices, the direction and goal of policy adjustment should be " In terms of maintaining a virtuous circle of the real estate market, we will further reduce the burden on residents' housing consumption, and firmly adhere to the positioning of "housing to live without speculation".