Influence hundreds of millions of people! The central bank announced the “re-pricing” of housing loans! The interest rate decline channel has been opened

(Author: Hangzhou Ke, this article is reprinted from the WeChat public account "Real Estate Hangzhou Ke", ifeng.com Real Estate has been authorized)

01

I guess everyone is As you can see, yesterday morning, the central bank issued an announcement on its official website, requiring major banks to convert the pricing basis of existing floating rate loan interest rates to LPR. The conversion work will begin on March 1, 2020, and in principle should be completed before August 31, 2020.

Because it affects hundreds of millions of people and more than 20 trillion in existing mortgage loans, this is definitely a super big news.

Full text of the announcement (please scroll down):

Announcement [2019] No. 30 of the People's Bank of China

In order to deepen the market-based reform of interest rates and further promote loan market quotations Interest rate (LPR) application, the announcement on the conversion of the pricing basis of existing floating rate loans to LPR is now announced as follows:

1. The term “existing floating rate loans” in this announcement refers to the financial institutions before January 1, 2020. Floating rate loans priced with reference to the loan benchmark interest rate that have been issued by the institution and those that have been contracted but not issued (excluding provident fund personal housing loans). Starting from January 1, 2020, financial institutions are not allowed to sign floating rate loan contracts that are priced with reference to the loan benchmark interest rate.

2. Starting from March 1, 2020, financial institutions should negotiate with existing floating rate loan customers on pricing basis conversion terms, and convert the interest rate pricing method agreed in the original contract to LPR as the pricing basis. Points are added (the points can be negative), and the value of the points is fixed during the remaining term of the contract; it can also be converted to a fixed interest rate. Pricing bases can only be converted once and cannot be converted again. Existing floating-rate loans that are in the last repricing cycle may not be converted. In principle, the conversion of existing floating rate loan pricing benchmarks should be completed before August 31, 2020.

3. The pricing basis for existing floating-rate loans is converted to LPR. Except for commercial personal housing loans, the point value is determined by negotiation between the borrower and the lender. The point-added value for commercial personal housing loans should be equal to the difference between the latest execution interest rate level of the original contract and the corresponding term LPR released in December 2019. From the time of conversion to the first repricing date thereafter (exclusive), the executed interest rate level shall be equal to the most recent executed interest rate level of the original contract, that is, the sum of the LPR of the corresponding period in December 2019 and the added point value. Thereafter, starting from the first repricing date, on each interest rate repricing date, the interest rate level will be recalculated and determined based on the LPR of the corresponding period in the most recent month and the added point value.

4. When financial institutions negotiate the pricing basis conversion terms with their customers, they can renegotiate the repricing cycle and repricing date. The shortest repricing cycle for commercial personal housing loans is one year.

5. If the existing floating-rate loan is converted to a fixed-rate loan, the interest rate level after conversion shall be determined by negotiation between the borrower and the lender. Among them, the interest rate level after conversion for commercial personal housing loans shall be equal to the most recent execution interest rate level of the original contract.

6. Financial institutions should use official website and outlet announcements, phone calls, text messages, emails, mobile banking and other channels to notify existing floating rate loan customers, negotiate and agree on specific matters for the conversion of pricing benchmarks, and protect borrowers in accordance with laws and regulations. Contractual Rights and Consumer Rights.

7. The branches of the People's Bank of China should strengthen guidance to local legal person financial institutions to ensure that local legal person financial institutions properly complete the conversion of existing floating rate loan pricing benchmarks in accordance with unified arrangements.

02

The announcement is not long, but many people may not understand it clearly. The key points are as follows -

1. The borrower can negotiate with the bank to determine Convert pricing basis to LPR, or to fixed interest rate.

The borrower only has one option, and cannot convert again after conversion. Existing floating-rate loans that are in the last repricing cycle may not be converted.

2. The pricing basis for existing floating-rate loans is converted to LPR. Except for commercial personal housing loans, the value of points added is determined by negotiation between the borrower and the lender.

3,

The conversion method is the fixed difference method.

For example, if you originally signed a 15% discount and the base interest rate is 4.9, then your actual interest rate is 4.165. The current LPR is 4.8, so if you switch to a new contract, your interest rate will always be 0.635 lower than the LPR. When LPR goes down, you go down too; when LPR goes up, you go up too.

4.

In order to implement the real estate market regulation requirements, the interest rate level of existing commercial personal housing loans at the time of conversion should remain unchanged.

3.

The borrower can negotiate with the bank to convert the pricing basis to LPR or to a fixed interest rate. The borrower only has one option and cannot convert again after the conversion.

03

The central bank issued Announcement No. 16 on August 25 this year, requiring that from October 8 this year, the new housing loan contract interest rate will be priced in LPR. Then there is the original base interest rate pricing. Therefore,

The central bank’s announcement today is aimed at existing loans before October 8.

It is estimated that many people are still a little confused about LPR. LPR is called Loan Prime Rate (LPR), which is the loan interest rate that commercial banks perform for their best customers. LPR is a market interest rate calculated by adding up and averaging a certain algorithm based on the bank's basic loan interest rate independently reported by 18 commercial banks (quoting bank group) every month.

To understand simply,

The benchmark interest rate is the guidance interest rate announced by the central bank, which is equivalent to the official interest rate. LPR is the market interest rate calculated by commercial banks based on market changes.

We know that the central bank’s benchmark interest rate was last announced on July 24, 2015, and it has not changed for more than four years. Because the LPR is formed by a market mechanism and is announced every month, it is much more flexible than the benchmark interest rate.

04

What everyone is most concerned about must be, is the new pricing mechanism a good thing for the tens of thousands of existing mortgage buyers? Will the monthly payment become less? The answer is obvious, of course. For example, the benchmark interest rate has not changed for more than 4 years, and the mortgage rate for more than 5 years is still 4.90.

The LPR had already dropped once a month ago on November 20, with the five-year LPR falling to 4.80 from the previous 4.85.

Suppose that the original interest rate you signed with the bank was a base interest rate, which would neither go up nor go down. Then, if you convert the base interest rate into LPR, without adding or subtracting points, your actual mortgage interest rate will have dropped from 4.9 to 4.8 by the agreed period.

05

What is particularly important here is that from the long-term trend, market interest rates must be downward, and the rate of decline may be rapid. Do you still remember what former central bank governor Zhou Xiaochuan said in late November, "In fact, China can still try to avoid quickly entering this era of negative interest rates." (For details, see "Why Mortgage Should Have "The Maximum Amount, the Longest Period" ? This sentence of Zhou Xiaochuan revealed") What does it mean to try to avoid entering the era of negative interest rates quickly? Doesn’t it mean that we can easily enter the era of negative interest rates quickly? We can look at the interest rate trends in several developed countries.

United Kingdom

Euro Zone

United States

Are the UK and Euro Zone both approaching 0? The United States was also close to 0 for a time, but it rebounded a bit after 2016.

You can doubt that the sun will rise from the west, nor should you doubt the impulse of the world's major central banks to loosen money and the long-term downward trend of interest rates.

06

Industry insiders predict that by the end of next year, the quotation of LPR for more than five years may drop to around 4. I don’t know if this prediction is reliable, but I still believe it.

Even if it doesn’t arrive at the end of next year, what about the end of the year after next? What about the end of the next year? There is no room for the benchmark interest rate to fall for the time being, so after the LPR interest rate is lowered in the future, the loan interest rates for existing loans in the past can also be lowered accordingly, enjoying the dividends of the LPR reform and the benefits of lower interest rates! The significance of the central bank's move is to extend the LPR reform's interest rate reduction on incremental loans to all loans (new existing loans). It will reduce the financing costs of the entire society and exceed market expectations. significant benefits.

So, if you receive a call from your bank soon, inviting you to re-sign the contract and change the interest rate, remember to accept it. And, please remember not to choose a fixed interest rate.

The central bank answers: How to price existing floating interest rates!

1. What are the main considerations for promoting the conversion of existing floating-rate loan pricing benchmarks?

Answer: On August 17, 2019, the People's Bank of China issued an announcement on reforming and improving the loan market quoted interest rate (LPR) formation mechanism. At present, nearly 90% of newly issued loans have been priced with reference to LPR, but existing floating rate loans are still priced based on the loan benchmark interest rate, which cannot reflect changes in market interest rates in a timely manner and is not conducive to protecting the rights and interests of both borrowers and lenders. In order to further deepen the LPR reform, the People's Bank of China issued [2019] Announcement No. 30 to promote the smooth conversion of the pricing benchmark of existing floating interest rate loans.

2. What are the principles for conversion of existing floating-rate loan pricing benchmarks?

Answer: First, the borrower can negotiate with the bank to convert the pricing basis to LPR or to a fixed interest rate. The borrower only has one option and cannot convert again after the conversion. Existing floating-rate loans that are in the last repricing cycle may not be converted. Second, the conversion work will start on March 1, 2020, and in principle should be completed before August 31, 2020. Third, the interest rate level of the loan after conversion shall be determined through negotiation between the two parties. In order to implement the real estate market regulation requirements, the interest rate level of existing commercial personal housing loans at the time of conversion shall remain unchanged.

3. How to convert the pricing basis of existing commercial personal housing loans from the loan base interest rate to LPR?

Answer: From the date of the announcement, banks should formulate a work plan for the pricing benchmark conversion of existing commercial personal housing loans as soon as possible, including system support, personnel training, etc., and at the same time, through multiple channels (including official websites and outlets) Announcements, text messages, emails, mobile banking and telephone notifications, etc.) to inform customers that, subject to consensus reached by both parties, changes to the original contract terms will be made as simple and feasible as possible.

If the pricing basis is converted to LPR, the term type of LPR will be determined based on the borrowing term of the original contract. Once determined, it will not be adjusted during the remaining term of the contract; the added point value is the latest execution interest rate of the original contract and the difference between December 2019 and December 2019. The difference in monthly LPR (can be negative) is fixed during the remaining term of the contract; the interest rate level at the conversion point remains unchanged; the borrower and the lender can re-agree on the repricing cycle and repricing date, and the shortest repricing cycle is one year. .

For the same commercial personal housing loan, if it is converted at any time between March and August 2020, the added point value will be determined based on the LPR in December 2019 and the original interest rate level, and the added point value will not be affected. The impact of the conversion time point can be reasonably decentralized by banks and customers. Currently, the repricing cycle of most existing commercial personal housing loans is one year and the repricing date is January 1 of each year. For example, if the original contract term of a commercial personal housing loan is 20 years, the remaining term is 8 years, and the interest rate stipulated in the original contract is 10 plus the benchmark interest rate for loans with a term of more than 5 years, the current interest rate is 4.9× (1 10 )=5.39.

The LPR over 5 years released in December 2019 was 4.8. If the borrower and the lender decide to switch the pricing basis on March 30, 2020, and the repricing cycle is still one year, and the repricing date is still January 1 of each year, then the point increase rate should be 0.59 percentage points (5.39-4.8=0.59) .

From March 30 to December 31, 2020, the interest rate level implemented is still 5.39 (4.8 0.59). On the first repricing day thereafter, that is, January 1, 2021, in accordance with the re-agreed repricing rules, the interest rate executed will be adjusted to the LPR 0.59 for more than 5 years released in December 2020, and so on every year thereafter. .

4. How to convert the pricing basis of other existing loans except commercial personal housing loans?

Answer: In addition to commercial personal housing loans, other existing floating-rate loans, including but not limited to corporate loans, personal consumption loans, etc., can be negotiated by the borrower and the lender in accordance with market-oriented principles to determine the specific conversion terms, including reference to LPR The maturity type, point value, repricing cycle, repricing date, etc. may be converted to a fixed interest rate.