Should you convert to LPR?
It is necessary to convert to LPR floating interest rate form. The LPR announced in January 2020 was 4.8, from February to March it was 4.75, and in April it was 4.65. After changing, the monthly payment can be reduced.
And judging from the current trends in recent years and the overall economic development, interest rates are showing a downward trend, and it is cost-effective to switch to LPR. Of course, once selected, it cannot be changed, and there is also the risk of interest rates rising in the future for a long period of time.
Some users, whose existing mortgage interest rates are discounted from the benchmark, feel that changing to the LPR pricing benchmark will lead to an increase in interest rates. In fact, this worry is unnecessary. The anchor replacement policy fully takes this special situation into consideration.
Therefore, it is specifically mentioned that the number of points added after conversion to LPR can be negative. The level after conversion is still the original execution interest rate and will not be higher than the original level; in addition, the number of points added in each year after the conversion will not be higher. If you change, you can also enjoy the dividends of the downward trend of LPR.
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Don’t have the mentality that after choosing to convert to LPR floating interest rate, the interest will definitely decrease every year compared with the previous year. Although the general direction of LPR is to decline, the LPR over 5 years will not decrease as much as the 1-year period, and the rate of decline will be slower. There may also be repetitions in the process. In particular, there is no guarantee that every user will be exactly every year. The LPR level of the previous month corresponding to the repricing day was just on the downside.
The original base interest rate of 4.9% is equivalent to LPR 4.8%. It depends on your judgment on the rise or fall of LPR in the future. Switching to LPR is just a gamble. But this policy has just started and it will definitely benefit you from switching. . There will definitely be a slight decline in the past few years. . But no one can tell what will happen in the next few decades.
If LPR=4.8, the effect will be the same whether it is adjusted or not. If LPR4.8 it is good for you, if LPR4.8 it is bad. Do you want to transfer the LPR interest rate?
It is recommended to switch to LPR interest rate.
Currently, there are two choices for mortgage interest rates: convert to a fixed interest rate or choose LPR? The most important thing in choosing one is to look at the future interest rate trend in the loan market.
The trend of loan interest rates is closely related to the overall economic environment. Under normal circumstances, the economy develops relatively quickly, and the corresponding loan interest rates will also rise. On the contrary, if the future economic development is not optimistic, the economic growth rate will slow down. If the situation slows down, bank loan interest rates may also decrease accordingly.
Based on the current development trend of my country's economy, experts judge that my country's economy will not be able to maintain rapid growth in the next few decades as it was in the past. Economic growth will slow down and social investment will shrink. This is definitely a major trend. . Once economic development slows down and social investment slows down, the central bank may cut interest rates or reserve requirement ratios at any time to stimulate social investment. At that time, both the benchmark interest rate and the LPR will fall accordingly.
However, generally speaking, the central bank will not easily use interest rate cuts as an important means, and will instead use LPR and other market means to regulate social funds. If the central bank does not cut interest rates in the future, the price of LPR may be much lower than the benchmark interest rate. Under this background, the mortgage interest rate required to choose LPR may be relatively low.
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LPR interest rate conversion time
According to the bank announcement: Starting from March 1, 2020, financial institutions should negotiate pricing with existing floating rate loan customers Negotiate the benchmark conversion clause to convert the interest rate pricing method agreed in the original contract to LPR as the pricing benchmark and add points (the points can be negative). The value of the points will be fixed for 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. Should the loan be changed to LPR? Is it better to change it or not to change it?
If you want to change it to LPR, change it well.
1. Comply with policy requirements:
The era of central bank benchmark interest rates has ended and a new era of LPR has ushered in; since the policy encourages everyone to convert existing loan interest rates to LPR interest rates, it must be for the benefit of the people For your own sake; since it is required by policy guidance, there is nothing wrong with following the policy.
2. Strive for opportunities to lower loan interest rates:
In order to better reflect the true market situation, LPR is set to be adjusted once a month, and LPR pricing will be adopted at any time to regulate currency. . Therefore, LPR is floating, and mortgage interest rates are repriced every year. According to LPR trend predictions, there is a high probability that LPR will show a downward trend in the future.
3. Convert the existing benchmark loan interest rate into the LPR basis point pricing model, which is in line with the current and future loan interest rate model:
The original loan interest rates were based on the central bank’s The benchmark loan interest rate is 4.9, which can be adjusted upward or discounted. However, the future loan interest rate will be based on the pricing model of several basis points of LPR, which is in line with the loan pricing model and also meets the policy requirements.
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Loan precautions:
1. Timely repayment of mortgage loan:
The principle of good faith is the emperor's clause in civil activities , which are also the terms that we must abide by when performing the contract. As a party to the mortgage contract, it is our obligation to repay the loan in full and in a timely manner in accordance with the conditions stipulated in the contract.
2. Reasonably determine the loan period:
Mortgage loan contracts generally have clauses about early repayment. Early repayment must be approved by the bank, because early repayment of the loan will be harmful to the bank. have an impact on period earnings. In real life, banks usually charge liquidated damages for early repayment. Of course, the policies of each bank will be different.