Recently, the internal circulation of the economy and the conversion of mortgage interest rates have been frequently searched. On August 12, the five major banks including Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China, Bank of China, and Postal Savings Bank all issued announcements stating that, Starting from August 25, the Bank will convert the pricing basis of existing floating rate personal housing loans that meet the conversion conditions but have not yet been converted into LPR in batches. The loan pricing basis can only be converted once, and cannot be converted again after conversion.

One stone stirred up a thousand waves, and there was a lot of heated discussion on the Internet. Many netizens left comments: I haven’t figured out what LPR is, so I am forced to transfer it? How is LPR floating interest rate calculated? Which one is more cost-effective, LPR or fixed loan interest rate? Does choosing LPR or fixed loan interest rate have any impact on special additional deductions for personal income tax? Today I will talk to you about the selection of mortgage interest rates under the economic cycle~

Question 1. What exactly is LPR?

LPR is the loan market quote rate, which is the abbreviation of English Loan PrimeRate. It is the loan market quote rate formed by the central bank based on the market quotes of representative commercial banks. It currently includes 1-year, There are two types of loans with a term of more than 5 years, and the one related to housing loans is mainly the 5-year LPR.

Question 2. How is LPR floating interest rate calculated?

According to the People's Bank of China Announcement [2019] No. 30, the point 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. That is, after converting to reference LPR pricing, the expression of interest rate will become LPR spread (adding points can be a negative value), where LPR is the pricing benchmark.

Next, let’s learn about the calculation method of LPR through two small cases:

Example 1. Zhang purchased a house through a commercial loan, and the mortgage interest rate before adjustment was 10% higher than the 4.9% benchmark interest rate, that is, 4.9% * 1.1 = 5.39%. Assuming that Zhang chooses to use floating LPR, according to data released by the National Interbank Funding Center on December 20, the 5-year LPR in December was 4.8%. This is also the standard for reference in this reform. After calculation, the spread is 5.39% - 4.8% = 0.59%. Zhang's future mortgage interest rate calculation formula is LPR + 0.59. No matter how LPR is adjusted in the future, Zhang needs to add 0 points to this basis. ．59.

Example 2. Zhang purchased a house through a commercial loan. The mortgage interest rate before adjustment was 10% off the base interest rate of 4.9%, that is, 4.9% * 0.9 = 4.41%. Suppose Zhang chooses floating LPR. After calculation, the spread is 4.41%-4.8%=-0.39%. Zhang’s future mortgage interest rate calculation formula will be LPR-0.39. No matter how LPR is adjusted in the future, Zhang Moujun needs to subtract 0.39 points on this basis.

Question 3. Which one is more cost-effective, LPR or fixed loan interest rate?

Since the choice of mortgage interest rate this time may affect our lives for up to 30 years in the future, our army of house slaves are very entangled. Which is more cost-effective, LPR or fixed loan interest rate? Next, the editor will make a simple comparative analysis for you, for your reference only. You still need to make your own decisions for big things~

1. Choosing a fixed interest rate is suitable for the following groups:

The author recommends choosing if the mortgage interest rate is lower than 4.9%, especially if you enjoy a large discount rate, have a long remaining repayment period, and do not plan to repay the loan in advance. Fixed interest rate.

Theoretically, the minimum decrease in LPR is 0, and there is no upper limit in theory for the increase, and the repayment period can be as long as 30 years. Although the LPR decrease is expected to be greater in the short term, in the long term The possibility of an increase cannot be ruled out. Since we already enjoyed the interest rate discount before the conversion, we no longer need to choose LPR to take risks for insurance purposes.

2． Choosing LPR is suitable for the following groups:

Mortgage loan interest rates are higher than 4.9%, especially if the interest rate rises significantly, the remaining repayment period is short or the remaining repayment period is long but the loan is paid off early If you plan, the author recommends choosing LPR.

In the context of internal economic circulation, how to expand domestic demand is a key issue, and the key to expanding domestic demand is to allow people to have money for consumption. For most of us ordinary home buyers, mortgages overdraft our consumption expenditures. In order to release our purchasing power, it is not ruled out that the country may further reduce the LPR to reduce our loan repayments. Therefore, according to the current situation, the market generally It is expected that LPR will generally show a downward trend in the short term. Since the original interest rate we applied before the conversion has increased significantly, we can enjoy the dividends of interest rate cuts at least in the foreseeable years by re-electing.

In addition, it needs to be made clear that for those who bought a house with full payment or only got a provident fund loan, this choice has nothing to do with you, you can just be a common person~

Question 4. Does choosing LPR or fixed loan interest rate have any impact on special additional deductions for personal income tax?

Housing loan interest is one of the six special additional deductions for personal income tax. According to regulations, housing loan interest is a personal housing loan from a commercial bank or housing provident fund used by the taxpayer himself or his spouse alone or jointly. The first home loan interest expense incurred when purchasing a home in China for yourself or your spouse. In the year in which loan interest is actually incurred, a fixed amount of RMB 1,000 per month will be deducted, and taxpayers can only enjoy one interest deduction for their first home loan.

Therefore, whether we choose LPR or fixed loan interest rate, it will not have an impact on our enjoyment of the personal tax housing loan interest deduction preference. In addition, regarding the policy requirements related to tax incentives for housing loan interest, the editor summarizes the following for you:

Finally, I would like to remind you that all major banks have made it clear that after the batch conversion is completed, if there is any objection to the conversion result , you can transfer it back through self-service mobile banking or negotiate with the loan handling bank before December 31 (inclusive). Remember the time limit~