The People’s Bank of China ’s loan interest rate reform covers existing commercial personal housing loans
The relevant loans need to be converted to LPR pricing, but in order to implement the real estate market regulation and control requirements, the interest rate level of such loans at the time of this conversion should remain unchanged, that is, There will be no change in owner’s interest expenses in the next year. In the future, it will be re-priced according to LPR, and long-term interest expenditure may be reduced following the LPR reduction. Analysis believes that it will have little stimulus to the mainland property market.
According to the example of the People’s Bank of China, suppose a certain stock of commercial personal housing loans has a loan period of 20 years and a remaining period of 8 years
The current loan interest rate approved by the bank is 5.39%. According to the LPR of 5 years or more announced in December is 4.8%. When the interest rate is converted, the interest rate pricing will be LPR of more than 5 years + 0.59%, which means that the loan interest rate will remain unchanged at 5.39%.
Thereafter, this commercial personal housing loan will be recalculated annually at LPR + 0.59%. As the loan interest rate will be adjusted every year according to the latest LPR quotes, under the current global low interest rate environment, the market expects that LPR will still have the opportunity to be reduced, and the interest expenses of owners may be reduced.
Slow down
However, based on the expected slowdown in the LPR, each time or at a rate of 5 basis points, the analysis believes that the stimulus effect on the mainland property market is limited. Stabilizing property prices and expectations is still a requirement of the Chinese authorities to promote the healthy development of the real estate market .