On August 31, the People's Bank of China and the General Administration of Financial Supervision jointly issued the Notice on the Adjustment and Optimization of Differential Housing Credit Policies and the Notice on Matters Relating to the Reduction of Interest Rates on Inventory of First-Household Loans to guide the downward movement of the actual downpayment ratio and interest rates on individual housing loans. This time, while clarifying the lower limit of down payment ratio for first and second suites, the lower limit of mortgage interest rate for second suites has also been adjusted. As for the stock of housing loans, the policy also specifies two ways to reduce the stock of housing loans.

Individual housing loans down payment ratio lower limit unified, comprehensively reduce the threshold for residents to buy a home

According to the People's Bank of China, the State Financial Supervision and Administration issued the "Notice on Adjusting and Optimizing Differential Housing Credit Policies", for the loan to purchase commercial housing for the resident families, the first set of housing commercial personal housing loans minimum down payment ratio uniformly not less than 20%, the second set of housing commercial personal housing loans minimum down payment ratio uniformly not less than 30%.

In this regard, the People's Bank of China, the State Financial Supervision and Administration of the relevant person in charge of the response, the unification of the national commercial individual housing loans minimum down payment ratio policy floor, no longer distinguish between the implementation of "purchase restrictions" city and do not implement the "restriction on the purchase of" city.

That is to say, for the implementation of the purchase restrictions on the city, the first and second suite commercial loan ratio will be lowered from the previous 30%, 40% to 20% and 30%.

The industry believes that the adjustment of the lower limit of the down payment ratio will comprehensively reduce the threshold for residents to buy a home.

The lower limit of commercial loan interest rate for the second suite will be lowered by 40 basis points, promoting the release of improved housing demand.

According to the Notice on Adjustment and Optimization of Differential Housing Credit Policies issued by the People's Bank of China (PBOC) and the State Financial Supervision and Administration Bureau (SFSAB), the lower limit of the second-suite housing interest rate policy was adjusted to be no less than the Loan Market Quoted Rate (LPR) of the corresponding term plus 20 basis points. The lower limit of the first-suite housing interest rate policy remains at no less than the LPR minus 20 basis points for the corresponding term.

In May 2022, the lower limit of the first-suite commercial loan interest rate has been reduced to LPR -20BP for more than 5 years, but the second-suite has always maintained LPR +60BP for more than 5 years, which is equivalent to a 40-basis-point reduction in the second-suite commercial loan interest rate after the implementation of this policy.

The industry believes that this will help reduce the cost of second-suite home purchases and promote the release of improved housing demand.

According to the city's policy, the policy of second-tier cities or faster landing

The two departments of the policy stipulates that each place can, in accordance with the principle of city-specific policies, according to the situation of the local real estate market and the need for regulation, independently determine the jurisdiction of the first and second set of housing minimum down payment ratio and interest rate floor.

Cao Jingjing, general manager of the index research department of the China Index Research Institute, pointed out that most of the cities that are still implementing the purchase restriction are core first- and second-tier cities, and even though the central bank clearly still adopts the "city-by-city" approach, due to the current downward pressure on real estate in most of the cities, it is expected that the second-tier cities will soon adjust the percentage of down payment to the lower limit level, and adjust the interest rate for the second set of housing loans. Optimize the second set of mortgage interest rates. In addition, the current first-tier cities mortgage interest rates are still at a high level, Beijing, Shanghai, two sets of commercial loan interest rates for more than 5 years LPR +105 basis points, the second set of mortgage interest rates plus points there is also the possibility of downward adjustment.

There are two ways to reduce the stock of mortgage interest rates to save interest expenses

On the same day, the People's Bank of China and the State Financial Supervision and Administration Bureau also issued the Notice on Matters Relating to Reducing the Interest Rate of the First Housing Loan on the Inventory, for eligible housing loans on the inventory, since September 25, 2023, can be applied by the borrower on his own initiative to the underwriting bank, but also encourages the bank to provide borrowers with a more convenient service by way of issuing announcements, batch processing, and other means. Adjustment methods, both can change the contractual agreement of the housing loan interest rate plus points, but also by the bank newly issued loans to replace the stock of loans.

Cao Jingjing believes that reducing the interest rate on the stock of first home loans not only saves interest expenses for borrowers, but also reduces the phenomenon of early repayment of loans for banks.

According to the monitoring of the Central Index Research Institute, in August, the average first home loan interest rate in key cities has been reduced to 3.9%, compared with the high point of 2021 down more than 150 basis points, while the stock of home loan interest rates since 2022 with the 5-year LPR above only 45 basis points, the gap between the interest rate on newly issued loans and the interest rate on the stock of loans has widened, superimposed on the decline in the rate of return on financial management, since last year, the residents pay back their loans in advance more cases.

Since mid-July, the Central Bank has continued to make noises to promote commercial banks to adjust the interest rate of the stock of personal housing loans in an orderly manner in accordance with the law. The Notice states that "the specific interest rate adjustment range is determined by the negotiation between the borrower and the lender, but the adjusted interest rate cannot be lower than the lower limit of the first set of housing loan interest rate policy of the city where the original loan was issued". Therefore, for the borrower, how much the interest rate can be reduced depends on the lower limit of the lending rate policy of the city where the original loan was issued and the negotiation with the commercial bank.

The People's Bank of China, the State Financial Supervision and Administration of the relevant person in charge, said that in recent years China's real estate market supply and demand has undergone significant changes, borrowers and banks for the orderly adjustment and optimization of assets and liabilities have demand. The decline in interest rates on stock housing loans can save interest expenses for borrowers, which is conducive to expanding consumption and investment. For banks, it can effectively reduce the phenomenon of early repayment of loans, reducing the impact on the bank's interest income. At the same time, it can also compress the space of the illegal use of business loans and consumer loans to replace the stock of housing loans and reduce the risk potential.

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