The February loan market quotation rate (LPR) was released as scheduled. According to the official website of the central bank, on February 20, the 1-year LPR was 3.65%, and the 5-year LPR was 4.3%. Both types remained unchanged from before.
It should be noted that the pricing of the 5-year LPR is also related to the monthly payment of all stock buyers.
From the perspective of the industry, in addition to reducing the LPR with a period of more than 5 years to promote the recovery of the property market, it is more important to reduce the interest rate of high-cost mortgage loans through reasonable measures.
Why is it unchanged for 6 consecutive months
The People's Bank of China authorized the National Interbank Funding Center to announce that on February 20, the LPR was 3.65% for the one-year period and 4.3% for the period over five years, both of which were consistent with the previous ones.
The above LPR is valid until the next release.
Since August 2022, the LPR has remained unchanged for 6 consecutive months.
As Zhou Maohua, a macro researcher at the Financial Market Department of China Everbright Bank, pointed out, the LPR remained unchanged this month, mainly because the MLF policy interest rate remains unchanged, and some banks have greater pressure on interest margins.
Judging from the financial data in January, the total amount of credit and the demand for corporate credit are ideal, which reflects to a certain extent that the current interest rate level remains moderate; at the same time, in January, the prices of new commercial housing in 70 large and medium-sized cities ended their 11 consecutive month-on-month declines, indicating that the property market as a whole is gradually improving. The pick-up reflects that the domestic policy of “policies tailored to cities” to stabilize the real estate market is gradually showing effect, the real estate market is expected to improve, and the necessity of short-term reduction of mortgage interest rates has decreased.
In addition, considering the seasonal factors in January, further economic data guidance is needed to cut interest rates.
Wang Yunjin, a senior researcher at the Zhixin Investment Research Institute, said that the fact that the LPR quotation has remained unchanged for six consecutive months shows that the central bank has a relatively cautious attitude towards the decision to cut interest rates.
On the one hand, although the interest rate hikes in major developed countries have declined, they are still in the interest rate hike cycle, and they are likely to maintain high interest rates in 2023. The external conditions for my country to cut interest rates again are still not loose.
On the other hand, from a domestic point of view, the current economy is in the stage of stabilization and recovery. In January, credit and social financing increased sharply, corporate financing willingness increased, and the necessity of cutting interest rates in the short term has decreased; a number of previous financial policies are continuing to be implemented, and the policy effect is still there. It remains to be seen, however, that the urgency to cut rates declines.
In addition, most banks have lowered deposit and loan interest rates in recent months, and the first-home loan interest rate and credit loan interest rate in some areas have fallen below 4%, and the room for further interest rate cuts is relatively limited.
"Targeted interest rate cut" may become an important guide
Although the LPR has not moved for several months, from the perspective of the industry, "targeted interest rate cuts" may become an important policy guide, while reducing costs while taking into account structural adjustments to achieve differentiated and precise support.
As Wen Bin, Chief Economist of China Minsheng Bank, pointed out, MLF and LPR rate cuts are universal. While stimulating demand, it is also easy to breed arbitrage space and cause local overheating.
Therefore, judging from the series of policies that have been introduced, targeted interest rate cuts for some industries may be an important policy orientation.
For example, in recent years, the central bank has introduced a number of structural policy tools to reduce the marginal liability cost of commercial banks with a re-lending rate of 1.75%, guide the downward trend of loan interest rates, and effectively support important areas and weak links of the real economy.
As another example, at the beginning of 2023, the central bank and China Banking and Insurance Regulatory Commission established the first set of dynamic adjustment mechanism for housing loan interest rate policy, and cities with a cold property market can break through the lower limit of housing loan interest rates (4.1%). 3.7%, while the first-tier cities are generally higher than the LPR (4.3%) with a period of more than 5 years, which can increase the precision of property market regulation and avoid obvious hot and cold unevenness in various places.
Talking about the direction of the follow-up monetary policy, Wen Bin predicted that in view of the strong credit in January and the "good start", the issuance of corporate credit in February is expected to maintain a certain intensity. With the increasing willingness of enterprises to raise funds and the rising activity of the real estate market , the need for short-term RRR cuts and interest rate cuts has declined.
However, in the early stage of economic recovery, the easing policy will not be easily withdrawn. If the structural problems of "strong enterprises and weak residents" and "strong government and private weak" in the follow-up financial data have not been improved, and no obvious turning point has been seen in real estate restoration, MLF interest rate cuts cannot be ruled out. The possibility of wide monetary tools exerting force again after the two sessions of the country.
Wang Yunjin believes that this year's demand expansion strategy will continue to advance, adjust the capital structure of financial institutions, and encourage them to expand their ability to serve the real economy. This needs to continue to reduce capital costs and maintain reasonable and sufficient liquidity. The central bank may also slightly reduce RRR by 1-2 Second; in order to maintain a low level of market interest rates to stimulate demand, the central bank may slightly lower the reverse repurchase rate and MLF interest rate to support commercial banks.
In addition, tools such as policy-based developmental financial instruments and special re-loans for equipment renovation will continue to promote the implementation of major projects; We will continue to increase financial support for key areas and weak links.
Can the current stock mortgage interest rate be reduced?
Because most of the loans over 5 years are housing loans, the reduction of interest rates has attracted the attention of home buyers.
On the whole, LPR mainly affects existing loans. From the perspective of the industry, whether it is new mortgages or other loans, the increase point is currently being reduced. However, considering the market situation, the current possibility of reducing the interest rate of existing mortgages is unlikely.
The current 5-year LPR is 4.3%. This data has several important features.
Yan Yuejin, research director of E-House Research Institute, interpreted that the current LPR is generally at a low level, especially compared to 2021. It is normal to lower or maintain low interest rates in the past two years, which is an important support for boosting the economy.
Also talking about the possibility of further declines in such interest rates, he bluntly said that "as far as the current situation is concerned, there will be no decline."
The reason is that the frequent decline in 2022 is inseparable from the economic situation at that time, and this year's epidemic will reduce the interference with the macro economy, so objectively, the monetary policy will maintain its strength.
Yan Yuejin believes that such determination will inevitably prevent LPR from cutting interest rates as frequently as in 2022.
In addition, the current trend of foreign interest rate hikes is relatively obvious. From this perspective, the space for domestic interest rate cuts is indeed decreasing. It also needs to constantly balance the relationship between domestic and foreign monetary policies to ensure that the domestic LPR policy is accurate and well-considered.
It is worth mentioning that recently, many topics about housing loans have been frequently searched, especially the call for a decline in the interest rate of existing housing loans.
Yan Yuejin believes that if the LPR is not lowered, the reduction of existing loans based on this year's LPR data will basically not exist in theory. In view of the current problems of early repayment of loans that complain that the interest rate is too high, it may also be suggested that specific banks target Point-to-point communication and coordination of some excessively high interest rates, such as interest rates exceeding 5%, are similar to temporarily postponing one-year interest rate payments or other coordination methods to further reduce the pressure on various types of prepayment of existing loans.
However, Pang Ming, Chief Economist and Research Director of Jones Lang LaSalle in Greater China, said that considering the policy orientation of effectively reducing the burden of buying houses and loan costs to increase residents' demand for houses, and the current interest rate of residential mortgages compared with corporate loans The objective reality that the interest rate and the macroeconomic growth environment are still relatively high does not rule out the possibility of an asymmetrical reduction in the LPR with a period of more than 5 years in the future to play an anchoring effect and push the mortgage interest rate down further.
"Overall, in order to avoid the failure of the traditional monetary policy transmission mechanism, the timing of subsequent RRR cuts and interest rate cuts needs to be better grasped. There is room for 0.5 percentage points of RRR cuts throughout the year, and the LPR with a period of more than 5 years may continue to be slightly lowered by 10 percentage points. Around the base point, targeted policies (including targeted interest rate cuts) are expected to be the main tone in 2023," Wen Bin said.
Wang Yunjin also said that the central bank's policy interest rate and LPR will be adjusted in due course according to this year's economic recovery and financial data.
The 2023 financial market work conference held in early February emphasized the need to improve the ability of financial services to expand domestic demand and build a modern industrial system. This shows that it is necessary for the central bank to keep interest rates at a low level this year.
In his view, the 1-year LPR has limited room for further downward adjustment, and the 5-year LPR still has some room for downward adjustment.
Based on a comprehensive analysis of the pace of interest rate cuts and market demand, the LPR is expected to be cut twice this year, with a higher probability of cuts in the second and fourth quarters, of which the 5-year LPR may be cut by about 20 basis points.