How does the future interest rate of LPR linked to existing housing loan go?

category:Finance
 How does the future interest rate of LPR linked to existing housing loan go?


On February 29, industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, construction bank, Bank of communications, postal savings bank, China Merchants Bank, Everbright Bank, Minsheng Bank, industrial bank, Shanghai Pudong Development Bank and other banks issued announcements to introduce the specific implementation rules of pricing benchmark conversion. In order to make customers understand the conversion rules more intuitively, ICBC, Agricultural Bank of China, Bank of China, China Construction Bank and other banks also released detailed illustrations.

According to the announcement of various banks, the individual floating rate housing loans that have been issued before January 1, 2020 and that have signed contracts but not yet been issued, which are priced by reference to the benchmark interest rate of the central bank, need to be converted. Fixed rate loans, individual housing loans with accumulation fund, overdue loans (overdue in whole amount) and non-performing loans are not included in the scope of this conversion. If the housing loan of the buyer is a combination loan, the commercial personal housing loan shall be switched according to the relevant provisions, and the provident fund loan shall still be executed according to the original contract. In addition, if the borrower has multiple real estate loans, it needs to handle the conversion one by one.

Due to the special period, in order to reduce the number of people gathered, the bank suggests that customers handle business through mobile banking, online banking and other online channels. If you cant handle it through online channel, you can handle it through outlet counter or intelligent teller machine. According to incomplete statistics, at present, the Bank of China, China Construction Bank, China Merchants Bank, China Guangfa bank, etc. can only be handled through online channels, but not offline acceptance.

It is worth mentioning that the specific conversion time of each bank is not the same. Among them, the six major state-owned banks all said that they would accept the application from March 1 to August 31. The joint-stock banks are relatively delayed, Huaxia Bank will gradually open the conversion work from the end of March, China Merchants Bank, industrial bank, Guangfa bank, etc. will carry out the conversion work from April, and Everbright Bank will carry out the batch conversion of individual stock floating rate housing loan pricing benchmark on July 21.

According to the regulations of the central bank, there are two ways to convert the pricing benchmark of stock floating interest rate loans: one is to convert the pricing method of interest rate agreed in the original contract to the floating interest rate formed by LPR plus point, and the other is to convert to the fixed interest rate. It should be noted that there is only one chance to choose the conversion method, and it cannot be converted again after conversion. Therefore, which conversion method to choose and how to calculate the interest rate of LPR pricing method have become the most concerned issues of the buyers.

For the calculation idea of reference LPR pricing mortgage interest rate, according to the principle of equivalent conversion, use the existing interest rate level to calculate the value of the plus point, and convert the benchmark interest rate floating up and down (doing multiplication) to LPR plus point (doing addition). As for the calculation idea of conversion to fixed interest rate, the converted interest rate level is equal to the current executive interest rate level of the original contract, and the interest rate level is fixed within the remaining term of the contract.

According to the announcement of each bank, when converting to LPR plus floating interest rate, the plus point value is equal to the difference between the current execution interest rate level of the original contract and the LPR of the corresponding period issued in December 2019, that is: plus point value = the current interest rate level of the customer - LPR issued in December 2019. In addition, the value of the plus point can be negative, and the value of the plus point is fixed for the remaining term of the contract. If the original contract loan period is five years or less, refer to one-year LPR; if the original contract loan period is more than five years, refer to five-year LPR.

It is worth noting that the conversion mode of reference LPR pricing needs to re stipulate the re pricing cycle (generally one year) and re pricing date. Assuming that the repricing period is one year, and the repricing date is January 1 of the next year, that is to say, the mortgage interest rate on January 1, 2021 will be calculated according to the LPR plus point of the corresponding term in December 2020, and this interest rate will remain unchanged in 2021, until January 1, 2022, the interest rate level of the new year will be recalculated, and so on.

For example, suppose customer a has a real estate loan, the remaining repayment period is ten years, the original pricing level is the benchmark interest rate floating 10%, and the current execution interest rate is 4.9% u00d7 (1 + 10%) = 5.39%. If converted to a fixed interest rate, the interest rate will be 5.39% for the period 2020-2030.

If the floating interest rate formed by conversion to LPR plus point, as the loan contract term is more than five years, refer to the LPR value of more than five years released in December 2019, that is, 4.8%, and the plus point value of customer a is 0.59% (5.39% - 4.8% = 0.59%, that is, 59 basis points). That is to say, in the later repayment period, the housing loan interest rate of customer a = LPR + 0.59% in December of last year. According to the formula, the housing loan interest rate is still 5.39% in 2020, the same as the conversion to fixed interest rate.

In February this year, the LPR quotation is 4.75% for more than five years. Assuming that in December this year, the LPR quotation continues to decline to 4.7%, then the house loan interest rate of customer a in 2021 is 4.7% + 0.59% = 5.29%, which is 0.1 percentage point lower than the conversion to fixed interest rate. If the subsequent LPR continues to decline, the mortgage interest rate will also be reduced accordingly.

On the whole, which conversion mode to choose depends on the future trend of LPR. If LPR shows an overall decline pattern in the future, it is more favorable to choose the pricing method referring to LPR plus points. Analysts predict that under the current background of reducing the financing cost of the real economy, there is still room for LPR to go down, and suggest that mortgage customers choose to switch to LPR pricing mode.

Wen bin, chief researcher of China Minsheng Bank, said that interest rates are cyclical and fluctuate according to changes in the economic cycle. At present, LPR is in a downward period, and choosing LPR pricing will reduce the cost of housing loan; however, once the economy is in an upward cycle, inflation pressure will rise, and LPR interest rate will also rise. Therefore, there is interest rate risk in choosing LPR pricing method. At this stage, he suggested that LPR plus point mode should be selected. If LPR picks up in the future, customers can choose to prepay to avoid the cost rise caused by the rise of mortgage interest rate.

Yan Yuejin, research director of the think tank center of E-House Research Institute, also believes that the general trend of real interest rate is downward, and the choice of LPR plus floating interest rate may be beneficial to buyers.

Benchmark conversion does not mean interest rate reduction

In December 2019, the peoples Bank of China announced that since March 1, 2020, financial institutions should negotiate with customers of stock floating rate loans on the conversion terms of pricing benchmark, and convert the interest rate pricing method agreed in the original contract to form with LPR as the pricing benchmark plus point, or to fixed interest rate. In principle, the conversion should be completed before August 31, 2020.

At that time, the relevant person in charge of the central bank said that since the central bank issued the reform and improved the formation mechanism of LPR, nearly 90% of new loans have been priced with reference to LPR, but the stock floating rate loans are still priced based on the benchmark interest rate of loans, unable to reflect the changes in market interest rates in a timely manner, which is not conducive to protecting the rights and interests of both borrowers and lenders. In order to further deepen the LPR reform, the central bank promoted the stable conversion of pricing benchmark of stock floating rate loans.

In order to promote the two tracks in one track of loan interest rate, improve the efficiency of interest rate transmission, and promote the reduction of real economy financing cost, the central bank improved the formation mechanism of LPR, and clarified the reference LPR pricing of subsequent new loans, and gradually adjusted the reference LPR pricing of stock loans. Lou Feipeng, a specially invited researcher of China pension finance 50 forum, pointed out that the current conversion of mortgage interest rate started by the banking industry is an important way to improve the pricing mechanism of interest rate according to the reform idea of the central bank, promote the market-oriented reform of interest rate, and realize the two tracks in one track of interest rate.

Analysts pointed out that the conversion of mortgage interest rate is only the change of pricing mode, which does not mean that the mortgage interest rate will be reduced. Liu Guoqiang, deputy governor of the peoples Bank of China, said recently that the downtrend of LPR will not affect the interest rate of personal housing loan basically. Real estate non speculation is still the leading direction of the current real estate regulation and control policy. The central banks monetary policy implementation report also stressed that we should adhere to the positioning that the house is used to live, not to speculation. The bank can determine the personal housing loan interest rate through LPR plus point, basically maintaining the original level.

Zhang Dawei, chief analyst of Zhongyuan Real estate, pointed out in an interview with the Beijing Business Daily that for the existing housing loans, in 2020, only the pricing method will be transformed and the interest rate will remain unchanged. In 2021, it may enjoy the interest rate reduction after transformation, but the range is relatively limited, so for most of the existing loans, the impact is very small. At the same time, in the housing market is not speculation, market stability is the mainstream, mortgage interest rate fluctuations will not be big. Yan Yuejin also believes that in terms of this year, interest rates will continue to be lowered, and mortgage rates will be reduced. However, this does not mean that the future mortgage interest rate has been downward. If the subsequent real estate market is hot, the interest rate may also be increased. It is worth noting that, in addition to personal housing loans, the loans to be converted include personal consumption and operation loans, personal commercial housing loans, public loans, etc. A number of banks said that offline processing was adopted for the conversion of public loan pricing benchmark, and the customer manager of the loan handling bank would contact the customer to negotiate the related conversion matters. Source: editor in charge of Beijing Business Daily: Guo Chenqi ufe63 nbj9931

Zhang Dawei, chief analyst of Zhongyuan Real estate, pointed out in an interview with the Beijing Business Daily that for the existing housing loans, in 2020, only the pricing method will be transformed and the interest rate will remain unchanged. In 2021, it may enjoy the interest rate reduction after transformation, but the range is relatively limited, so for most of the existing loans, the impact is very small. At the same time, in the housing market is not speculation, market stability is the mainstream, mortgage interest rate fluctuations will not be big.

Yan Yuejin also believes that in terms of this year, interest rates will continue to be lowered, and mortgage rates will be reduced. However, this does not mean that the future mortgage interest rate has been downward. If the subsequent real estate market is hot, the interest rate may also be increased.

It is worth noting that, in addition to personal housing loans, the loans to be converted include personal consumption and operation loans, personal commercial housing loans, public loans, etc. A number of banks said that offline processing was adopted for the conversion of public loan pricing benchmark, and the customer manager of the loan handling bank would contact the customer to negotiate the related conversion matters.