LPR reduction, how much can the monthly supply save?

　　The LPR with a period of more than 5 years ushered in the third adjustment this year.

　　The People's Bank of China authorized the National Interbank Funding Center to announce that on August 22, 2022, the loan market quotation rate (LPR) is: 1-year LPR is 3.65%, down 5 basis points, and LPR over 5 years is 4.3%, down 15 basis points.

　　Cumulatively, since the beginning of this year, the 1-year LPR and the 5-year LPR have been reduced by 15 basis points and 35 basis points respectively.

Among them, in May this year, the LPR with a period of more than 5 years announced a reduction of 15 basis points to 4.45%, the largest decline since the implementation of the LPR.

This time, the LPR with a period of more than 5 years was cut again by 15 basis points.

　　Chen Wenjing, market research director of the Index Division of the China Index Research Institute, pointed out that as of August 2022, LPRs with a maturity of more than 5 years have been reduced by a total of 35 basis points, which is the largest interest rate cut in 2019 after the mortgage interest rate was changed to an LPR with a maturity of more than 5 years.

　　For the real estate market, it is the LPR with a term of more than 5 years that can better reflect the trend of mortgage loan interest rates.

As a reference benchmark for mortgage quotations, the adjustment of LPR for more than 5 years affects the mortgage of home buyers, that is, the decline of LPR means that the monthly payment amount is reduced, that is, the cost of buying a house is reduced.

　　According to the regulations, the interest rate of the newly issued first personal housing loan shall not be lower than the LPR of the corresponding term (4.3% based on the LPR of more than 5 years on August 22); the interest rate of the second personal housing loan shall not be lower than the LPR of the corresponding term plus 60 basis points ( 4.9% based on 5-year LPR on August 22).

　　This time, the LPR with a period of more than 5 years is lowered again, which is "in line with market expectations" in the industry's view.

　　Yan Yuejin, research director of the Think Tank Center of the E-House Research Institute, pointed out that the further reduction of the LPR was in line with market expectations. The previous rate cut by the MLF made everyone not surprised by this rate cut.

However, the rate cut by 15 basis points slightly exceeded expectations, fully demonstrating the orientation and urgency of further reducing medium and long-term capital costs.

　　Taking a mortgage loan with a loan amount of 1 million yuan and a 30-year equal principal and interest repayment as an example, before the interest rate adjustment, the LPR of the first personal housing was 4.45%, and the monthly payment at this time was 5037.19 yuan.

After the interest rate adjustment, the LPR for more than 5 years is 4.3%, and the monthly payment at this time is 4948.71 yuan.

Based on this calculation, the monthly payment has decreased by about 88.48 yuan, and the total loan interest has decreased by about 31,900 yuan.

　　Judging from the cumulative reduction of LPR for periods of more than 5 years since the beginning of this year, under the same conditions, the monthly payment will be reduced by about 207.66 yuan.

　　Lu Qilin, research director of 58 Anju Room Real Estate Research Institute, pointed out that the 5-year LPR adjustment is the third adjustment this year. The entry into the market of housing demand is conducive to the recovery of the real estate market.

For existing home loan customers, the adjustment of the loan interest rate will be reflected in the next interest accrual year.

　　Jiang Han, a senior researcher at Pangu Think Tank, pointed out that from the perspective of the current LPR decline, the short-term LPR declines less, and the long-term LPR declines more, which can also represent the current overall market expectations, which is to promote the development of interest rates in the entire market towards a more rational direction. Therefore, there are different long-term and short-term decline arrangements.

　　From the perspective of the development of the real estate industry, Jiang Han believes that the impact on the real estate market, especially the mortgage market, is very far-reaching.

For those who repay their mortgages, the decline in LPR can reduce the overall benchmark interest rate, which can reduce the overall repayment pressure of those who repay mortgages, thereby helping to increase the level of disposable income.

For the housing market, the decline in LPR can stimulate the rigid demand of the housing market, increase the activity of the housing market, and promote more rigid buyers to enter the market.

　　Li Yujia, chief researcher of the Housing Policy Research Center of the Guangdong Provincial Urban Planning Institute, also mentioned that this rate cut has a relatively large role in promoting rigid demand, improved demand, and housing exchange demand.

　　It is worth mentioning that at present, differentiated housing credit policies have been implemented in many places to support rigid and improved housing demand, and the interest rate of first home loan in many places has been lowered to 4.25%.

　　On May 15 this year, the People's Bank of China and the China Banking and Insurance Regulatory Commission issued the "Notice on Issues Concerning Adjustment of Differential Housing Credit Policies", proposing that for households who have borrowed to buy ordinary self-owned houses, the first commercial personal housing loan The lower limit of the interest rate is adjusted to not be lower than the market quoted interest rate of the corresponding term loan minus 20 basis points.

　　Subsequently, the housing loan interest rate in many places was lowered on the basis of 4.45%, including Xinjiang, Qinghai Xining, Anhui Bengbu, Jiangxi Jiujiang, Jiangxi Yichun, Jiangsu Suzhou, Tianjin, Henan Zhengzhou, Shandong Qingdao, Shandong Jinan, Inner Mongolia Hohhot, Hebei Tangshan , Jiangsu Nantong, Guangdong Huizhou and other places, the first home loan interest rate fell to 4.25%.

　　Liu Lijie, a market analyst at Shell Research Institute, said that this time the LPR of more than 5 years will drop to 4.3%, the lower limit of the first-home loan interest rate will be adjusted to 4.1%, and the lower limit of the second-home loan interest rate will be reduced to 4.9%. There is room for further reductions in mortgage rates.

　　Liu Lijie believes that the local property market support policy will be further increased in August.

At present, most cities have low thresholds for housing purchases, low interest rates and low down payments, and the overall loose policy environment on the demand side will help boost market expectations.

The practical improvement of the supply side in the later period, such as the orderly resumption of construction and delivery of new housing projects, and the accelerated resolution of the debt risks of housing companies, is the key to fundamentally repairing market expectations.