According to the regulations of the central bank, on March 1, the benchmark conversion of existing personal housing mortgage loans was started and will be completed on August 31 in principle. According to the report on the implementation of Chinas monetary policy in the second quarter of 2020, released on August 6, the benchmark conversion of existing loans has reached 55% by the end of June. Among them, the conversion progress of existing enterprise loans was 76%. The reporter learned that recently, some branches of the central bank held a supervision meeting, requiring financial institutions within the jurisdiction to speed up the conversion of pricing benchmark for floating rate loans. With less than a month left, some of the slower banks are in a sprint.
Floating or fixed
After the mortgage interest rate is no longer linked to the benchmark loan interest rate, Zhang Kaili is faced with two choices: one is to choose a fixed interest rate, which will not fluctuate in the future repayment period, and will maintain the current interest rate of 3.92% for the remaining loan term until the loan is paid off.
The second is to choose floating interest rate, which is changed from floating according to benchmark interest rate to floating according to LPR.
Under the new formula of mortgage interest rate, the mortgage interest rate = LPR + points. Once the points are determined, they will remain unchanged. In fact, a 20% discount to her previous benchmark interest rate is a similar concept.
According to the regulations of the central bank, the converted points, that is, the added point value, should be equal to the difference between the latest executed interest rate level of the original contract and the LPR in December 2019.
The LPR over 5 years released in December 2019 is 4.8%. The latest interest rate of the original contract is 3.92%, and Zhang Kailis credit points are 3.92% - 4.8% = - 0.88%, that is, 88 basis points less.
No matter how the LPR changes in the future, Zhang Kailis mortgage rate will always be the current LPR quotation minus 88 basis points.
If the LPR offer rate is lower than 4.8%, then Zhang Kailis mortgage rate will be lower than 3.92%; and vice versa.
The choice of conversion method is based on personal judgment of future interest rate trend. Yan Yuejin, research director of the think tank center of E-House Research Institute, told reporters that mortgage borrowers should decide whether to handle the mortgage according to their judgment on the future interest rate trend. However, according to the actual situation, there is a lot of room for further reduction of interest rates, and the conversion into LPR has a positive effect.
According to the customer operation mode of several large state-owned banks and some joint-stock banks, the process of bank app is relatively simple, and two choices need to be made: one is to choose LPR + floating interest rate or fixed interest rate; the other is to select the date of interest rate adjustment, which can be January 1 of each year or the date of loan issuance. Click the supplementary agreement to agree to the change of interest rate terms, and the conversion can be carried out immediately.
How to choose the repricing date
In addition to the choice of floating rate or fixed rate, there is another problem that is easy to be ignored. When the benchmark is changed, the repricing date of loans can be changed.
First of all, we should pay attention to the pricing cycle. In the original mortgage contract, the general repricing cycle of floating rate mortgage is one year, that is, the frequency of interest rate price change is once a year. Of course, if the benchmark interest rate is not adjusted within this year, it will not change. In this adjustment, there is basically no change in this option.
However, the repricing day gives customers the opportunity to choose again. Generally speaking, there are two ways to reprice the mortgage: at the beginning of each year, that is, January 1; or the date of loan issuance.
In this LPR conversion adjustment, banks generally provide customers with the option of January 1 of each year or loan granting date in the background of mobile phone operation.
In addition to the above two popular options, some banks also allow customers to renegotiate an adjustment date with the bank. However, some banks do not provide customers with the option of repricing date, only allow customers to choose floating rate or fixed interest rate.
For example, recently, some readers reported to our reporter that Tengzhou agricultural and commercial bank did not provide the option of repricing date, and tacitly agreed to January 1 of each year. In response to customers questions, the bank said that the central bank only said that repricing cycle and re pricing date can be re agreed , and there was no mandatory requirement. On August 7, the reporter called President Li, head of a branch of Tengzhou agricultural and commercial bank. After the reporter indicated the intention of calling, the person hung up the phone and did not reply to the short message sent by the reporter.
What will be done without conversion
What is the progress of each banks conversion? Zhang Kailis bank account manager said that the clients he was responsible for had basically been informed, some of them had completed the change after seeing the SMS, and some had made a special call to inform them of the change. Previously, affected by the epidemic in March, there was no progress. After May, the company began to promote the transformation of customers.
Stock floating rate loans include not only housing loans, but also some public loans. The central bank has put forward specific requirements for the progress of corporate loans: the central banks report on the implementation of Chinas monetary policy in the first quarter of 2020 reveals that the central bank will strengthen the monitoring of the conversion progress, incorporate the conversion progress of the existing corporate loans of financial institutions into the MPa and qualified Prudential assessment assessment, and it is expected that the conversion can be basically completed by the end of August.
ICBC and Everbright Bank recently disclosed the progress of corporate business conversion. Among them, ICBC is promoting the conversion of LPR pricing benchmark for existing corporate customer loans, and the conversion progress has reached 76% by the end of June; the average interest rate of newly issued RMB loans in the first half of the year is 4.31%, with a year-on-year decrease of 45 basis points (BP). Liu Jin, President of Everbright Bank, said that by the end of June, the completion rate of LPR conversion of Everbright Banks public stock floating rate loans had exceeded 70%.
The person in charge of the Corporate Banking Department of local branches of large state-owned banks told reporters that corporate customers may be more sensitive to changes in interest rates. They have issued specific implementation rules and operational plans at the provincial branch level, focusing on the key customers with large loan amount and concentrated amount of investment. At the same time, they formulated a customer communication and negotiation plan and asked credit customer managers to contact each other door by door The companys customers, communicate with LPR pricing benchmark conversion related matters, sign a supplementary agreement. In addition, the specific person in charge is required to establish a weekly continuous tracking and monitoring report of LPR conversion progress.
Different from the public customers, the number of mortgage customers is relatively large, relatively scattered, the amount of different, and the progress is slower.
If the original mortgage customers have not completed the benchmark conversion operation, what will be done? In the announcement, the central bank said, in principle, the conversion of pricing benchmark for floating rate loans should be completed before August 31, 2020.
At the supervision meeting, the business management department of Hubei Provincial Associated Press reported the work of converting the pricing benchmark of stock floating rate loans of agricultural and commercial banks of Hubei Province, and five municipal and state banks including Xiantao and Xianning made analysis and speeches on the lagging progress of interest rate conversion.
However, the central bank has not made clear what kind of treatment will be taken if the mortgage conversion is not completed at the end of August. For the conversion of mortgage interest rate, each bank has different measures. For example, Bank of communications, China Merchants Bank, China CITIC Bank, Shanghai Pudong Development Bank, Minsheng Bank and other banks have indicated that they will conduct batch conversion on behalf of customers.
The customer service of Bank of Communications said, on August 21, 2020, our bank will uniformly adjust the existing floating rate housing loans which have not been converted to the market quotation rate (LPR) or fixed interest rate to the LPR floating rate plus or minus point method.
Some banks said they would implement the original contract. ICBC customer service told reporters that the conversion of pricing benchmark is not necessary. If the operation is not carried out, the loan interest rate will still be carried out as before. If the conversion is not carried out, ICBC will maintain the original pricing method. BOC customer service also replied that if not converted, the original contract will still be implemented. CCB customer service also said in accordance with the previous contract..
ABC customer service said that if the conversion loan has not been handled before August 31, the specific disposal policy needs to be further clarified by the peoples Bank of China. Before the conversion, your loan will be executed according to the original contract.