Conditions for Converting Loan Interest Rate Pricing Benchmark into LPR

Loans have been issued or signed before 1 and 1 in 2020, but no loans have been issued; 2. Refer to the benchmark loan interest rate; 3. Loans were initially priced at floating interest rates.

Loans have been issued or signed before 1 and 1 in 2020, but no loans have been issued; 2. Refer to the benchmark loan interest rate; 3. Loans were initially priced at floating interest rates. Fixed-rate loans with fixed interest rates do not need to be converted.

2. What does it mean for banks to convert LPR?

The conversion of banks to LPR means that the current benchmark interest rate plus bank floating will be changed to the loan interest rate calculation method of LPR plus basis points, so what we can see after the bank conversion is the change of future loan interest. For us, the interest calculation method of LPR loan has more room for operation. If you choose this method, you may pay more interest and less interest in the future.

The conversion of LPR by banks means that customers can convert the pricing based on "central bank benchmark interest rate" agreed in the original loan contract into pricing based on "loan market quoted interest rate (LPR)" (the main reference with a loan term of 5 years or less is formed by adding LPR with a loan term of 1 year, and the main reference with a loan term of more than 5 years is formed by adding LPR with a loan term of more than 5 years, and the added value can be negative). The added value is fixed within the remaining term of the contract and can be negotiated. It can also be converted into a fixed interest rate, and the interest rate level is fixed during the remaining term of the contract. The interest rate pricing benchmark can only be converted once, and cannot be converted again after conversion.

LPR is the loan market quotation (LPR), which is a basic loan reference rate calculated and published by the National Interbank Funding Center authorized by the People's Bank of China, and quoted by representative quotation banks in the form of open market operating rate (mainly referring to the medium-term lending convenience rate) according to the bank's loan interest rate for the best customers. All financial institutions should mainly refer to the loan pricing of LPR. At present, LPR includes 1 year and more than 5 years. LPR has a high degree of marketization, which can fully reflect the supply and demand of funds in the credit market. Using LPR for loan pricing can promote the marketization of loan interest rate and improve the transmission efficiency from market interest rate to credit interest rate.

On August 25th, 2020, 12, five state-owned banks, namely ICBC, China Construction Bank, Agricultural Bank of China, Bank of China and Postal Savings Bank, announced at the same time that individual housing loans within the scope of batch conversion would be uniformly adjusted to LPR (loan market quotation) pricing method according to relevant rules.

Three. Measures for the administration of loan interest rate pricing

The loan interest rate is mainly managed by fixed interest rate and R. When you apply for a mortgage, it used to be fixed interest rate, but now it can be converted into floating interest rate. If the floating interest rate is lowered, your interest will be less.

Fixed interest rate and floating interest rate, according to

According to the previous announcement of the People's Bank of China, floating rate loans will be fixed rate (LPR). From March 1 day to August 3 1 day, 2020, the borrower can negotiate with the bank on an equal footing to decide whether to change the loan interest rate to LPR (floating interest rate) or fixed interest rate.

Generally speaking, mortgage borrowers will be affected by this conversion, but there are several exceptions: first, the provident fund part of individual housing loans and portfolio loans; Second, fixed interest rate loans; Third, one of the three situations that will expire before the end of 2020 will not be affected by this conversion.

For the mortgage interest rate level during the share conversion period, it remains unchanged. In other words, the personal mortgage interest rate in 2020 is still the same as before. However, from 202 1 to 1, the mortgage interest rate has nothing to do with the change of the remaining term interest rate; If floating interest rate is chosen, the future mortgage interest rate will change with the change of 5-year LPR, and it will rise or fall or remain unchanged.

Which way is better?

According to insiders, the two conversion methods have their own advantages, and the specific choice mainly depends on the judgment of the market interest rate trend:

If it is believed that the LPR will decrease in the future, it will be converted into a reference LPR.

If you think LPR may set interest rates in the future, then you have an advantage.

The borrower of the existing mortgage should change the rate according to his own situation, as well as the loan price, loan term and loan balance. If the previous mortgage interest rate price concessions are strong and the remaining time of monthly payment is long, you can choose a fixed interest rate, which will not only help to lock in the monthly payment cost, but also facilitate the family's income and expenditure arrangements. If the remaining time of monthly payment is short and the loan balance is not much, floating interest rate may be more suitable.

In the short and medium term, China's interest rate is in a downward trend. It is beneficial for the borrower to change the existing floating interest rate mortgage to LPR as the pricing benchmark and to reduce the borrower's mortgage expenditure. Although it is difficult to judge the trend of long-term interest rates, the downward trend of short-term interest rates is basically known. In addition, even if there is a sharp rise in interest rates that are different from expectations, buyers can avoid interest rate risks by repaying in advance.

Although a number of banks have previously announced that since August 25, individual housing loans that meet the requirements and have not yet been converted into pricing benchmarks will be uniformly adjusted to LPR pricing. A number of banks said in the announcement that the move was carried out with reference to the practice of ordinary banks, with the aim of simplifying customer operations.

However, this does not mean that consumers have no choice. All banks have made it clear that after the batch conversion is completed, if they disagree with the conversion result, they can transfer it back through online banking or mobile banking or negotiate with the loan handling bank before February 3, 2020. It should be noted that the existing banks have made it clear that the cancellation operation can only be handled once.

The reason why banks adopt batch conversion is mainly because most mortgage borrowers are individuals, and the number is large and scattered. Batch conversion can save resources and improve processing efficiency.

The conversion of the pricing benchmark of floating rate loans is conducive to the marketization of interest rates and guides the downward trend of interest rates. The "Monetary Policy Implementation Report for the Second Quarter of 2020" recently released by the central bank pointed out that by the end of June, the conversion progress of stock loan pricing benchmark had reached 55%. Among them, the conversion progress of existing enterprise loans is 76%.

Statistics show that since the reform from 2065438 to August 2009, the quotation level of LPR has gradually declined. In August this year, the reported 1 year LPR and 5-year LPR were 3.85% and 4.65% respectively, which were 0.4 and 0.2 percentage points lower than those since the reform.

Four. Measures for the administration of loan interest rate pricing

The management methods of loan interest rate mainly include fixed interest rate and floating interest rate. The floating interest rate is lpr. When applying for a mortgage, it used to be a fixed interest rate, but now it can be converted into a floating interest rate. If the floating interest rate is lowered, your interest will be less.

Fixed interest rate and floating interest rate, according to the actual situation.

According to the previous announcement of the People's Bank of China, the pricing benchmark of the existing floating rate loans was converted into the loan market quotation (LPR). From March 1 day to August 3 1 day, 2020, the borrower can negotiate with the bank on an equal footing to decide whether to change the loan interest rate to LPR (floating interest rate) or fixed interest rate.

Generally speaking, mortgage borrowers will be affected by this conversion, but there are several exceptions: first, the provident fund part of individual housing loans and portfolio loans; Second, fixed interest rate loans; The third is the personal housing loan due before the end of 2020. If one of these three conditions is met, it will not be affected by this conversion.

For the mortgage interest rate level during the share conversion period, the central bank stipulates that the interest rate level will remain unchanged at the time of share conversion. In other words, the personal mortgage interest rate in 2020 is still the same as before. From 202 1 1, if the fixed interest rate is selected, the mortgage interest rate will be the same as the current interest rate for the remaining term, regardless of the change of LPR interest rate; If floating interest rate is selected, the future mortgage interest rate will change with the change of 5-year LPR, and it will be announced once a month, or it will rise or fall or remain unchanged.

Which way is better?

According to industry insiders, the two conversion methods have their own advantages, and the specific choice mainly depends on the mortgage borrower's judgment on the future market interest rate trend:

If we think that LPR will decline in the future, it will be better to refer to LPR pricing instead;

If you think LPR may rise in the future, it will be beneficial to switch to a fixed interest rate.

Stock mortgage borrowers should comprehensively choose the interest rate conversion method suitable for them according to their own situation, as well as the loan price, loan term and loan balance. If the previous mortgage interest rate price concessions are strong and the remaining time of monthly payment is long, you can choose a fixed interest rate, which will not only help to lock in the monthly payment cost, but also facilitate the family's income and expenditure arrangements. If the remaining time of monthly payment is short and the loan balance is not much, floating interest rate may be more suitable.

In the short and medium term, China's interest rate is in a downward trend. It is beneficial for the borrower to change the existing floating interest rate mortgage to LPR as the pricing benchmark and to reduce the borrower's mortgage expenditure. Although it is difficult to judge the trend of long-term interest rates, the downward trend of short-term interest rates is basically known. In addition, even if there is a sharp rise in interest rates that are different from expectations, buyers can avoid interest rate risks by repaying in advance.

Although a number of banks have previously announced that since August 25, individual housing loans that meet the requirements and have not yet been converted into pricing benchmarks will be uniformly adjusted to LPR pricing. A number of banks said in the announcement that the move was carried out with reference to the practice of ordinary banks, with the aim of simplifying customer operations.

However, this does not mean that consumers have no choice. All banks have made it clear that after the batch conversion is completed, if they disagree with the conversion result, they can transfer it back through online banking or mobile banking or negotiate with the loan handling bank before February 3, 2020. It should be noted that the existing banks have made it clear that the cancellation operation can only be handled once.

The reason why banks adopt batch conversion is mainly because most mortgage borrowers are individuals, and the number is large and scattered. Batch conversion can save resources and improve processing efficiency.

The conversion of the pricing benchmark of floating rate loans is conducive to the marketization of interest rates and guides the downward trend of interest rates. The "Monetary Policy Implementation Report for the Second Quarter of 2020" recently released by the central bank pointed out that by the end of June, the conversion progress of stock loan pricing benchmark had reached 55%. Among them, the conversion progress of existing enterprise loans is 76%.

Statistics show that since the reform from 2065438 to August 2009, the quotation level of LPR has gradually declined. In August this year, the reported 1 year LPR and 5-year LPR were 3.85% and 4.65%, respectively, with a cumulative decrease of 0.4 and 0.2 percentage points since the reform.