After a year, the central bank has once again signaled a reduction in the interest rates for existing housing loans.
The second round of interest rate cuts for existing housing loans is a foregone conclusion, and many borrowers are concerned about how banks will follow up and implement this.
On September 24, at a press conference held by the State Council Information Office, the governor of the central bank, Pan Gongsheng, stated that commercial banks will be guided to reduce the interest rates on existing housing loans to a level close to that of newly issued loans, with an estimated average reduction of about 0.5 percentage points.
A reporter from Yicai contacted several banks in Shanghai and Zhejiang to understand the situation regarding the subsequent reduction of interest rates on existing housing loans.
Some banks said that they have noticed the policy for adjusting the interest rates on existing housing loans, but have not yet received any relevant adjustment notices.
A staff member handling housing loans at a branch of a state-owned bank said that they will follow up quickly after the official documents are issued, "It is expected that relevant plans will come out next month at the earliest, and adjustments will be made uniformly after receiving the relevant notices."
Looking back at the last adjustment of interest rates on existing housing loans, on August 31, 2023, the central bank and the General Administration of Financial Regulation issued a document deciding to reduce the interest rates on eligible existing first-home loans starting from September 25 of the same year.
Subsequently, several banks issued announcements that they would start to reduce the interest rates on existing first-home loans in batches from September 25, 2023, and clarified the operational details.
By early September, the four major state-owned commercial banks, ICBC, ABC, BOC, and CCB, issued announcements clarifying the relevant matters concerning the adjustment of interest rates on existing first-home loans, answering questions about the scope of adjustment, the level of interest rates after adjustment, and the method of adjustment.
After that, several joint-stock banks and local urban and rural commercial banks followed suit, successively disclosing the details of the adjustment of interest rates on existing housing loans.
"Because there are many borrowers involved, banks also need a certain amount of time for the necessary technical preparations," Pan Gongsheng said at the release.
Next, the central bank is also considering guiding commercial banks to improve the pricing mechanism of mortgage loans, allowing banks and customers to negotiate autonomously based on market principles for dynamic adjustments.
"Housing loan interest rates issued by different banks in different regions and periods will be adjusted according to specific circumstances."
Industry insiders told reporters that generally, banks will adjust the interest rate clauses in the contract, and automatically execute the interest rate reduction in batches from the effective date of the policy on reducing interest rates on existing housing loans.
Loan customers do not need to apply actively, and after the adjustment, the bank will notify the borrower by text message.
Previously, there were mainly two speculations in the market about the path of reducing interest rates on existing housing loans, "transfer of mortgage" and repricing.
The main method adopted for the reduction of interest rates on existing housing loans in 2023 was repricing.
The difference between the two is that in the "transfer of mortgage" business, borrowers can change the lending bank.
Regarding the cross-bank "transfer of mortgage" discussed in the market, Pan Gongsheng revealed after the press conference that the "transfer of mortgage" will be implemented within the bank first, and then it will be considered whether cross-bank "transfer of mortgage" is needed.
Wang Qing, the chief macro analyst of Orient Gold & Credit Rating, said that implementing the "transfer of mortgage" within the bank for existing housing loans, that is, repricing the interest rates on existing housing loans, is the same as the path of reduction in September last year.
The reason for emphasizing "initially implementing the transfer of mortgage within the bank" is mainly because the existing housing loans are still high-yield, low-risk quality assets of the bank.
Allowing cross-bank transfer of mortgage will intensify competition among banks, especially for large banks with a higher proportion of existing housing loan scale, it will have a greater impact.
Lu Zhengwei, the chief economist of Industrial Bank, pointed out that looking at the issues that need to be considered in the "transfer of mortgage" business, in the cross-bank "transfer of mortgage" business, it is necessary to consider the revaluation of the value of the collateral, the change of mortgage ownership, and the different loan standards between different banks.
In addition, from the perspective of operational convenience, Yan Yuejin, the deputy dean of the Shanghai Yiju Real Estate Research Institute, believes that "transfer of mortgage" may increase a lot of extra workload.
In fact, in the previous adjustments of interest rates on existing housing loans, banks generally adopted a simpler method, that is, by automatically adjusting the system, directly reducing the monthly payment amount in the following months without the need for customers to perform additional operations.
People interviewed believe that the reduction of interest rates on existing housing loans will further reduce the return on assets of banks, affecting the profitability of banks, and will bring certain operational pressure to banks in the short term.
The interest spread of banks will be impacted.
Regulatory data shows that as of the second quarter, the net interest spread of commercial banks was 1.54%, a year-on-year decrease of 20BP, the lowest level in history since statistics were kept.
Among them, the net interest spread of large banks in the second quarter was 1.46%, a year-on-year decrease of 21BP, also the lowest level since statistics were kept.
According to the calculation of Dai Zhifeng, the chief analyst of the banking industry of Zhongtai Securities, a 50BP reduction in the interest rate on existing housing loans will have the greatest impact on state-owned banks, with a 6.4BP drag on the interest spread, and the joint-stock banks, city commercial banks, and rural commercial banks will be dragged down by 4.5, 2.7, and 3.0BP respectively.
The narrowing of the interest spread will also affect the revenue and profit of commercial banks.
Dai Zhifeng pointed out that it will drag down the revenue by 3.1 percentage points and the pre-tax profit by 7 percentage points.
The revenue of state-owned banks, joint-stock banks, city commercial banks, and rural commercial banks will be dragged down by 3.8, 2.2, 1.4, and 1.5 percentage points respectively, and the pre-tax profit will be dragged down by 8.4, 5.3, 2.9, and 3.1 percentage points respectively.
However, Dai Zhifeng also pointed out that if the interest rate on existing housing loans is reduced, on the basis of the actual increase in investment, the scale of mortgage loans of banks will stabilize, and in the long run, it will help to alleviate the growth pressure on the retail asset side of banks and the repayment pressure on residents, further optimize the asset structure of banks, maintain the interest spread of banks, and optimize the asset quality of the retail end of banks.
"It is expected that the reduction in early repayments can also support the interest spread to a certain extent.
Combining the deposit and loan ends, the reduction of interest rates on existing housing loans has a roughly controllable impact on the net interest spread and profit level of commercial banks."
A banking industry analyst said to the reporter.
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