The National Interbank Offered Rate Center authorized by the People's Bank of China (PBOC) announced that the quoted loan market rates (LPRs) on June 22, 2020 were: 1-year LPR was 3.85 percent, and 5-year or above LPR was 4.65 percent. 1-year and 5-year or above LPRs were both unchanged from the previous month. However, several market participants expect that there is still room for LPR quotes to fall later on, which will help drive down mortgage rates.

The latest report released by a number of institutions shows that, along with the first half of this year, a number of "interest rate cuts", the mortgage rates of banks in many places have shown a steady tendency to decline. But the current housing-related financial policy "housing not speculation" tone has not been adjusted. Industry insiders also said that in the interest rate down, many of the talent settlement supporting policies released intensively under the impetus of other factors, the real estate market shows signs of recovery, but by the part of the city epidemic prevention and control of the impact of the escalation again, the later trend is still uncertain.

LPR remained unchanged for two consecutive months

There is still room for downward movement

June LPR quotes came out, and the 1-year and 5-year-plus LPRs were both unchanged from the previous period, which was basically in line with the market's previous expectations. Dong Ximiao, a special researcher at the National Laboratory for Finance and Development, said in an interview with the Economic Reference Daily that the MLF bidding rate was not adjusted downward this month, and the LPR linked to it was therefore not adjusted. At the same time, the current central bank to strengthen the fight against the funds idle arbitrage behavior, the use of monetary policy tools more cautious.

May to June, LPR offer has been unchanged for two consecutive times. However, most industry insiders believe that there is still room for further downward movement of LPR in the later stage. the executive meeting of the State Council held on June 17th deployed to guide financial institutions to further make reasonable concessions to enterprises to help stabilize the basic economic situation; and requested to speed up the implementation of the policy of reducing fees and charges to see the effect, and reduce the burden of the market main body.

Wen Bin, chief researcher of China Minsheng Bank, said that the State Council executive meeting policy deployment has released a positive signal, which will help the market on the tightening of policy expectations to give a certain correction. The next stage, monetary and financial policy will continue to increase support for the real economy, with CPI rose further down, reduce the quota and interest rates still have the space and the need to reduce the deposit benchmark interest rate at the right time and appropriate, to guide the LPR downward, to realize the cost of direct and indirect financing and indirect financing "double down".

Wang Qing, chief macro analyst at Oriental Jincheng, also said that, taking into account the impact of overseas epidemics on domestic macroeconomic operations, the second half of the GDP growth rate to the potential level of economic growth in the return process, still need to be further macroeconomic policy, which the demand for counter-cyclical adjustment of monetary policy has not weakened. "From this we judge that this year in the financial system to increase concessions to the real economy at the same time, to promote broad credit with broad money is still the main conduction path of monetary policy, the second half of the policy interest rate cuts, quasi-decrease process is expected to continue to promote." He said.

Mortgage interest rates in many places have been steadily reduced

Housing transactions are active

Shanghai E-House Real Estate Research Institute released a report on the 22nd, said that from the historical data, in the first half of this year, the LPR has been announced in the six issues, which were done in February and April downward, respectively. Reflects the policy direction of interest rate cuts. For commercial banks, in the first half of this year, three cuts in the policy driven by the implementation of the policy of interest rate cuts in the enthusiasm is also improving.

In fact, mortgage rates in many places have shown a steady decline and a mild downward trend. Rong360 Big Data Research Institute of 41 key cities across the country 674 bank branches mortgage rate monitoring data shows that in the data monitoring period from May 20 to June 18, the national average interest rate for first-suite loans was 5.28%, down 4 basis points from a year earlier; the average interest rate for second-suite loans was 5.60%, a decrease of 3 basis points from a year earlier.

Rong360 big data research institute analyst Li Wanfu said, the first-tier cities at present mortgage rate changes or more stable than other cities, and LPR change amplitude of the synchronization is higher; other cities change the difference is a little more, smooth, small micro-adjustment and a sharp decline in all.

"Each bank's markup on top of LPR is basically the same. So far this year, LPR is going down, so mortgage rates are also going down." A real estate agent in Beijing said.

"Market liquidity was reasonably abundant in the first half of the year, and the cost of funds for commercial banks continued to fall, so there is room to lower mortgage rates." Dong Ximiao said. At the same time, mortgage assets have been relatively high-quality banking assets, and banks are motivated to continue to actively layout the field of business.

A report by the E-House Real Estate Research Institute analyzed that the cut in mortgage rates in the first half of this year helped reduce the pressure on monthly payments, which objectively helped activate some of the wait-and-see demand for home purchases. Its latest data released showed that in the first half of June, the number of second-hand home transactions in the 13 cities it focuses on monitoring amounted to 41,663 units, up 19.5 percent from the same period in 2019, a record high since October 2016, it said.

"There is expected to be room for further LPR cuts in the second half of the year, which will help drive down mortgage rates. Combined with factors such as increased supply of new properties and aggressive price cuts and promotions by real estate companies, housing transactions are expected to be further active." The report said.

Property market now showing signs of rebound

"Housing without speculation" tone remains unchanged

Industry insiders said that although the real estate market in the first quarter of this year by the impact of the epidemic to the freezing point, but the current The market has shown a sustained recovery trend. The sharp rebound in housing transactions is one example.

"A small sunrise in the real estate market has emerged." Zhang Dawei, chief analyst at the Centaline Property Market Research Center, said that in addition to the steady decline in mortgage rates, the recent intensive release of talent settlement supporting policies in many places is also an important reason for boosting the recovery of the real estate market.

Nanchang City, June 22, released "on the support of university graduates and skilled personnel to stay in Changchang entrepreneurial employment of the implementation of the views" clearly settled with incentives, employment subsidies, entrepreneurial support, home purchase has a number of measures, etc. June 20, Yiwu City, Zhejiang Province, further adjustments to the talent policy, pointing to the abolition of the household registration requirements, adjusting the Yiwu work (social security payments) for more than two years requirements and adjust the mortgage loan down payment ratio requirements.

"Cumulatively, as of mid-June, more than 100 cities in China have released new policies to attract talent. Among the supporting policies for talents, relaxing settlement and giving home purchase subsidies have become the main means of attracting talents in various places." Zhang Dawei said. He believes that credit policy and talent policy fine-tuning will have an important impact on the future direction of the real estate market.

However, some cities epidemic prevention and control escalated again or bring uncertainty to the later trend of the property market. Wang Xiaocang, an analyst at the Zhuge Housing Data Research Center, expects that with the escalation of epidemic prevention and control again, market demand will be slow to release in June, and price increases in various cities may be insufficient.

It is worth noting that in the case of reasonably abundant liquidity, mortgage rates are expected to continue to decline, real estate regulation and control will still adhere to the "housing without speculation" positioning. The central bank recently released "China's regional financial operation report (2020)" pointed out that the next step, we must adhere to the house is to live, not to speculate in the positioning and "not real estate as a short-term means of stimulating the economy" requirements, to maintain the continuity of real estate financial policy, consistency and stability. Adhere to the city policy, closely around the stable land prices, stable housing prices, stable expectations of the goal, improve the long-term management and control mechanisms, and promote the steady and healthy development of the real estate market.