The central bank announced a ＂rate cut＂, how much can the mortgage be saved？
After the Spring Festival holiday, China ushered in the first "interest rate cut" in 2024. On February 20th, the People’s Bank of China authorized the National Interbank Funding Center to announce that the one-year LPR was 3.45%, which remained unchanged. The LPR over five years was 3.95%, 25 basis points lower than the previous value. Among them, the decline of LPR over five years exceeded previous market expectations.
How much mortgage can this "interest rate cut" save? Why does LPR show asymmetric adjustment? What signal is released by the sharp decline of LPR over 5 years? Let’s watch this quick question and answer ↓
Q:How much mortgage can this "interest rate cut" save?
A:The LPR with a term of more than five years is the main reference benchmark for the pricing of medium and long-term corporate loans and personal housing loans. The lower limit of the national mortgage interest rate policy will be adjusted to 3.75% with the LPR, the interest rate of new mortgage loans will be reduced, and the interest rate of existing mortgage loans will be adjusted accordingly on the repricing date, which can save the interest expenses of mortgage borrowers.
“Assuming that the loan balance of the first suite is 1 million yuan, the matching principal and interest mortgage and the 30-year loan term are taken as examples, the monthly payment is reduced by about 145 yuan, and the total principal and interest for 30 years are reduced by about 52,000 yuan.Ma Hong, a senior researcher at Guangkai Chief Industrial Research Institute, said.
Q:Why does LPR show asymmetric adjustment?
A:Market participants generally believe that the asymmetric adjustment of LPR with different maturities will continue to promote the steady decline of social comprehensive financing costs.
LPR is the benchmark of bank loan pricing, and the interest rate stipulated in the loan contract generally adopts LPR plus point form. Compared with the change of policy interest rate, the change of LPR is directly related to the loan interest rate of enterprises and residents. This one-year LPR is flat and unchanged, which is in line with the unadjusted interest rate of the previous one-year MLF;As a reference for the pricing of medium and long-term corporate loans and personal housing loans, the LPR with a term of more than five years has dropped by 25 basis points, which fully reflects the determination of the central bank to promote investment and expand domestic demand.
"This LPR quotation reflects that monetary policy is based on me and takes into account internal and external balance." Dong Ximiao, chief researcher of Zhaolian, said that the Fed is likely to enter the interest rate cut cycle this year. However, considering the resilience of the US economy and inflation, and learning from the lessons of inflation rebound after the rapid interest rate cut in the 1970s, the Fed’s interest rate cut may be relatively stable, and the US policy interest rate will still be higher than that of China. It is difficult to reverse the upside-down spread between China and the United States in the short term. In this case, the one-year LPR remains unchanged, and the LPR decreases over five years, which not only maintains reasonable support for the real economy, but also gives consideration to internal and external balance, and improves the resilience to external shocks and the independent space of policies.
Q:What signal is released by the sharp decline of LPR over 5 years?
A:Considering the large decline of LPR over five years, the actual downward trend of LPR is larger overall, and the financial support for the real economy is further enhanced.
The decline of LPR in the medium and long term exceeded expectations, which effectively played a role in stabilizing investment and promoting consumption. Considering that long-term loans for enterprises and personal housing loans are the main reference for LPR pricing over five years,This will help enterprises to expand investment and the stable and healthy development of the real estate market.At the same time, with the adjustment of the interest rate of existing mortgage loans and the reduction of residents’ interest expenses,It is also conducive to the further recovery of residents’ consumption.
Wen Bin, chief economist of China Minsheng Bank, believes that the downward trend of LPR will effectively support the continued recovery of the economy. At present, the interest rate level is at a historical low: the interest rate of 10-year treasury bonds has dropped to about 2.5%, and the weighted average interest rate of new corporate loans in 2023 is 3.88%, down 0.29 percentage points year-on-year, the lowest since statistics, and the interest rate of individual housing loans has dropped 0.75 percentage points year-on-year. At present, the actual loan interest rate of enterprises is about 4%, which is generally appropriate. It is widely expected that inflation will rebound moderately this year, and there is still room for real interest rates to fall. In the current situation of insufficient effective demand and weak expectations, maintaining a low interest rate level will help to continuously support the recovery of the national economy, and there is still room for monetary policy to cope with various shocks and challenges in the future.
(Reporter/Ma Chunyang Planning/Wan Zheng Lang Bing)
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