On May 20th, the latest LPR quotation was released: 1 year LPR is 3.7%, and 5-year and above LPR is 4.45%. As expected by the market, the LPR interest rate was lowered, but to the market's surprise, this time the LPR interest rate was lowered for more than five years, with a reduction range of 15 basis points (BP).
This move is regarded by the market as the central bank alone "opening a small stove" for the real estate market. In this regard, there is a market view that if LPR is lowered for more than five years, the cost of existing mortgage loans will also be lowered, which will help reduce the mortgage repayment burden of existing buyers and boost consumer demand; In addition, the homeowner may reduce the incentive to repay the loan in advance and increase the willingness to hold shares, especially stocks with a dividend yield of more than 5%.
The sharp downward adjustment of LPR in the past five years has stimulated the soaring of China assets such as A shares, Hong Kong stocks and exchange rates. In the performance of the A-share market, as of the close of May 20th, the Shanghai Composite Index rose by 1.6%, regaining 3 100 points; Shenzhen Component Index rose1.82%; Growth enterprise market index rose1.69%; The Hong Kong stock market also rebounded significantly, with the Hang Seng Index rising by about 3% and the Hang Seng Technology Index rising by 4.7%.
As of May 20 16:30, the onshore RMB against the US dollar closed at 6.6740, up 938 basis points from the previous trading day and up 1090 basis points in one week. What's more, as of the close, the spread between offshore RMB and onshore RMB has also narrowed to 42 basis points.
From a broader perspective, the downward adjustment of LPR will not only affect the housing market, but also affect all walks of life and benefit more subjects. As a reference for the pricing of medium and long-term loans, the reduction of LPR over five years is helpful to promote the stabilization and recovery of medium and long-term loans and boost the financing needs of enterprises.
How to affect the property market
As the anchor of mortgage pricing, for buyers, the reduction of LPR interest rate for more than five years will reduce mortgage expenditure when the base remains unchanged. Industry insiders interviewed by CBN believe that, on the one hand, this means that the financial policy to support the just-needed housing demand is strengthened; On the other hand, with the adjustment of LPR for more than five years, the cost of existing mortgage loans has also decreased, which helps to reduce the mortgage repayment burden of existing buyers and boost consumer demand.
Since the LPR reform in August 20 19, the five-year LPR has been lowered four times, from 4.85% to 4.6%, and further reduced to 4.45% after this adjustment.
Industry experts told reporters that unlike corporate loans, personal housing loans have a long term. At present, more than 99% of individual housing loan interest rates are linked to LPR with a term of more than five years.
Recently, the central bank and the China Banking Regulatory Commission issued the Notice on Issues Related to Adjusting Differentiated Housing Credit Policies, which adjusted the lower interest rate limit of the first set of commercial personal housing loans nationwide from LPR to LPR-20BP, and maintained the lower interest rate limit of the second set of housing loans at LPR 60BP.
According to industry experts, after this adjustment, according to the latest LPR calculation, the interest rate of personal housing loan can reach 4.25% for the first suite and 5.05% for the second suite. The downward adjustment of LPR in the past five years is conducive to implementing the spirit of the the Political Bureau of the Communist Party of China (CPC) Central Committee Conference, supporting rigid and improved housing demand, reducing the pressure on residents' mortgage interest, stabilizing investment, consumption and macroeconomic fundamentals, and promoting the stable and healthy development of the real estate market.
After the completion of the 20 19 LPR reform, the interest rates of all new and existing commercial personal housing loans are based on the LPR in the same period. After the mortgage is converted into LPR interest rate model, all the new mortgages are priced by LPR model, and the existing mortgages will be converted in batches from the second half of 2020.
Industry experts said that the LPR adjustment will have an impact on newly issued and existing personal housing loans. Commercial personal housing loans will be added, and the interest rate will be lowered immediately 15 basis points. On May 5th, the central bank and China Banking Regulatory Commission adjusted the lower limit of the interest rate of the first commercial personal housing loan in China from LPR to LPR-20BP, which will bring double benefits to new applicants and families who buy second homes.
The expert also said that after the interest rate stipulated in the contract between the purchaser and the commercial bank is re-priced, the stock of commercial personal housing loans will also be reduced by 15 basis points. If the loan amount is 500,000 yuan, the term is 30 years, and the principal and interest are repaid in equal amount, the average monthly expenditure can be reduced by about 45 yuan, and the interest expenditure can be reduced by about 6,543.8+0.6 million yuan in the next 30 years.
However, it should also be noted that according to the regional characteristics of domestic mortgage interest rates, there is still uncertainty about whether local banking institutions will finally implement them. Moreover, in the actual situation, the first financial reporter learned that different banks will make different adjustments to the plus base according to the qualifications of lenders and the external environment at that time.
However, for banks, compared with assets, housing mortgage loans are still high-quality assets and have the motivation to increase investment. Wen Bin, chief researcher of Minsheng Bank, analyzed that in April, housing loans of residential departments decreased by 60.5 billion yuan, a year-on-year decrease of 402.2 billion yuan, reflecting the decline of residents' willingness to buy houses. This month, the LPR will be reduced by 15BP in five years, which will reduce the cost of buying houses as a whole, help meet the reasonable housing demand of residents and promote consumption.
Zhou, a macro analyst of China Everbright Bank, also told reporters that the downward adjustment of the listing price for more than five years will directly benefit manufacturing and real estate, and market confidence will gradually pick up. The accelerated recovery of real estate and manufacturing industry during the year will lead to the rebound of domestic consumption and investment, and the kinetic energy of domestic demand is expected to recover steadily.
Why does LPR cut interest rates asymmetrically?
In fact, the market is even more surprised by the sharp downward adjustment of LPR in the past five years. LPR consists of two parts: the open market operating interest rate and the plus point, in which the open market operating interest rate mainly refers to the medium-term lending facility (MLF) interest rate. Generally speaking, if the Multilateral Fund remains unchanged, LPR will be difficult to change. This month, LPR was lowered for the first time since the new LPR mechanism in 20 19.
"It is very urgent to promote the decline of loan interest rates for enterprises and residents with the focus on stimulating the credit demand of market entities and stabilizing the operation of the property market." Wang Qing, chief macro analyst of Oriental Jincheng, said that, more importantly, the market interest rate represented by the yield of interbank deposit certificates dropped sharply during this period, driven by the continuous expansion of the margin of monetary policy. In addition, the regulatory authorities are working hard to reduce the cost of bank deposits recently, so the motivation of the quotation banks to lower the LPR quotation has been significantly enhanced, which eventually led to the 5-year LPR quotation breaking the conventional downward adjustment in May.
The reason why the 5-year LPR quotation is lowered by 15 basis points, while the 1 year LPR quotation remains unchanged, in the eyes of the industry, this may be because the current corporate loan interest rate is at the lowest point since the reform and opening up for more than 40 years, while the residential mortgage interest rate is still at a high level; Moreover, since the beginning of the year, although the real estate financial environment has continued to pick up, due to the epidemic situation and the operating rules of the industry itself, the downward trend of the property market is still continuing, and the drag on the macro economy is increasing.
Among them, from June 5438 to April, the growth rate of real estate investment turned from positive to negative, and the housing-related consumption in the total retail sales of consumer goods continued to be in a negative growth state. Thus, following the announcement by the central bank 15 in May that the lower limit of the interest rate of the first home mortgage was lowered by 20 basis points, the five-year LPR quotation mainly for residential mortgage in May was also lowered by 15 basis points, indicating that the current targeted interest rate reduction policy in the property market is overweight, which is intended to curb the downward trend of real estate.
Zhou also told reporters that the five-year interest rate was lowered alone, which exceeded expectations. There are three main reasons: First, the demand for medium and long-term loans in the real economy has been weak in recent months, guiding financial institutions to reduce the interest rate cost of medium and long-term loans and boosting the financing needs of the real economy; Second, the domestic real estate recovery is not ideal in recent months, and the decline in the five-year quotation rate will help reduce the cost of mortgage loans, boost the demand for just-needed housing and promote the smooth operation of real estate; Third, before the introduction of the steady growth policy of the central bank, we should vigorously reduce the balance profits paid by the central bank according to law, re-lend, optimize the deposit interest rate, provide long-term and low-cost funds for banks and financial institutions, and reduce the interest rate cost of medium and long-term loans.
There is still room for downward adjustment in the future.
As a reference for medium and long-term loan pricing, the downward adjustment of five-year LPR will also help boost the financing needs of enterprises. In April, bill financing in the enterprise sector accelerated, and the growth of medium and long-term loans was weak, reflecting insufficient financing demand. Lower interest rates and lower medium-and long-term financing costs will help enterprises reverse their expectations as soon as possible, boost their confidence, speed up the completion of resumption of work and production, and thus promote economic operation in a reasonable range.
Dong Ximiao, a part-time researcher at the Institute of Finance of Fudan University and the chief researcher of Zhaolian Finance, also told reporters that the current 1 year LPR is already low (1 year MLF operating rate is 2.85%, with a spread of 85 basis points), and there is not much room for decline; Reducing LPR for more than five years can promote the reduction of medium and long-term loan interest rates of enterprises and boost their willingness and ability to resume production and expand investment. Judging from the financial data in the first quarter and April, the slow growth rate of medium and long-term loans of enterprises is a prominent problem; At the same time, promote the reduction of the burden of housing loans for residents.
In terms of exchange rate, "the 5-year LPR unexpectedly fell by 15 basis points, which boosted the market's risk sentiment and also boosted the RMB." A foreign exchange trader of a foreign bank told the reporter, "It is expected that we will continue to observe the potential impact of foreign capital outflows and export shocks on the trade surplus, as well as the subsequent strength of the US dollar. We believe that the USD/RMB may go out of the W shape. "
After this LPR adjustment, looking forward to the future, most market views believe that LPR still has room for downward adjustment.
Qin Peijing, chief strategist of CITIC Securities, analyzed that on May 20th, the central bank lowered the LPR/KLOC by-0/5 basis points for more than five years, marking the beginning of this round of intensive and steady growth policy, and the focus of monetary policy shifted from loose money to wide credit. It is expected that RRR and LPR will have room to cut interest rates for the rest of this year.
According to Wang Qing's analysis, since the fourth quarter of 20021,the market has fully expected the Fed's policy tightening, and the Fed has also started to raise interest rates and reduce the size of bonds, but this has not affected the Bank of China's two RRR interest rate cuts in February last year and April this year and the interest rate cut in June this year. Therefore, if RRR continues to be lowered in June or even the beginning of the second half of the year, there will be some room for LPR quotation to be lowered. This will also push corporate loan interest rates and residential mortgage interest rates down even more.
Wen Bin also said that the current global inflation is fluctuating at a high level, the monetary policies of major economies are tightening at an accelerated pace, and the international situation is becoming more complicated and changeable. In the next stage, it is expected that monetary policy will continue to play its dual functions of aggregate and structure, increase relief efforts for difficult industries, enterprises and people, and promote economic stabilization and recovery to operate in a reasonable range.