Whether the mortgage interest rate should be fixed or LPR needs to be determined based on personal circumstances. It is recommended to choose LPR:
1. The state’s promotion of mortgage interest rate conversion is an inevitable choice for interest rate marketization and is also for control financial risk. In the future, interest rates will fall. If the gap between the interest rate of more than 30 trillion existing mortgage loans and the LPR is too large, it will cause instability in the real estate industry and affect the stability of the financial system.
2. The interest rate change is a decision of the central bank. In the final analysis, it is a state action. "Benefiting the people" is the general direction of bank reform.
3. Whether to convert to fixed or LPR is only related to the judgment of future interest rate trends. If you think interest rates will rise in the future, choose fixed. If you think interest rates will fall, choose floating.
4. The general trend of interest rates will be downward in the future, and the interest rate level is related to the economic level. In the long run, the more the economy develops, the lower the interest rate level will be. In reality, we can easily find that the poorer the country, the higher the interest rate, and the more developed the country, the lower the interest rate. This is the rule for countries and regions around the world.
LPR affects the pricing of personal mortgage loans:
1. On August 12, 2020, five major state-owned banks, ICBC, China Construction Bank, Agricultural Bank of China, Bank of China and Postal Savings Bank of China, issued announcements at the same time. Starting from August 25, personal housing loans within the scope of batch conversion will be uniformly adjusted to the LPR (loan market quoted interest rate) pricing method in accordance with relevant rules.
2. Batch conversion is to uniformly convert the interest rate pricing method agreed in the original contract into the LPR plus point formation method. The plus point value is equal to the latest execution interest rate level of the original contract and the corresponding term LPR released in December 2019. The difference and point value can be negative and are fixed for the remaining period of the contract.
3. From the time of conversion to the first interest rate adjustment date (repricing date), the mortgage interest rate remains unchanged. On each interest rate adjustment date, the loan interest rate level will be recalculated and determined by taking the sum of the most recently released LPR of the corresponding period and the points added value.
Reference for the above content? Baidu Encyclopedia-LPR