How will the interest rate be adjusted after Bank of China switches to LPR?

How to adjust the interest rate after the Bank of China switches to LPR:

According to the announcement of the People's Bank of China, when switching to LPR, the shortest repricing cycle (the interval between two repricing dates) is For one year, although the LPR is quoted every month, the mortgage interest rate will not be adjusted every month. After this conversion, starting from the first repricing date, on each repricing date, the interest rate level will be recalculated and determined based on the LPR of the corresponding period in the latest month and the point value added on the conversion date, and will remain unchanged within a repricing cycle.

Tips for special situations:

1. If you successfully switch to personal mobile banking or personal online banking on the same day: you choose the repricing date as the loan disbursement date, and the conversion date coincides with the loan disbursement date. If the date is the same day, the point-added value will be calculated based on the LPR interest rate in December 2019 (December of the previous year) at the time of conversion, and the price will be repriced based on the latest published LPR value that has taken effect on that day.

2. If your conversion is successful at the smart counter on the same day: you choose the repricing date as the loan disbursement date, and the conversion date and the loan disbursement date happen to be on the same day, the conversion time point is as follows (December of the previous year) The LPR interest rate in December 2019 is calculated as a point value, and the loan disbursement date in the following year will be repriced according to the latest published LPR value that has taken effect.

The above content is for your reference, please refer to actual business regulations.

If you have any questions, please feel free to consult Bank of China’s online customer service.

You are sincerely invited to download and use Bank of China Mobile Banking APP or Bank of China Cross-border GO APP to handle related businesses. Will mortgage LPR rise in 2022?

Mortgage LPR is expected to fall in 2022, because under the influence of the international and domestic epidemic, the economic downward pressure in many places is relatively high, and many small businesses and physical stores cannot survive. , in order to support these real economies and enterprises to resume production and reach capacity, interest rates have to be cut to meet their needs. At the same time, multiple regulators have frequently released policy signals supporting interest rate cuts. Therefore, mortgage LPR is expected to fall in 2022, but the specific drop is not known yet and has to wait for the official announcement.

LPR refers to the loan base interest rate, and mortgage LPR means applying the loan base interest rate to the mortgage. A bank uses LPR as the pricing benchmark for mortgage loans, and then based on the cost of funds, the customer's credit premium and the term The risk premium floats freely on the LPR basis. It is reported that starting from October 8, 2019, the central bank will adjust the interest rate of commercial personal housing loans. It will no longer fluctuate up and down according to the central bank's benchmark loan interest rate, but will use LPR as the rate setting standard.

What to do with the previous contract after the mortgage interest rate is changed to LPR? After the mortgage interest rate is changed to LPR, you need to sign a new loan contract with the bank. Once the new contract is signed, the old contract will be invalid. When re-signing a contract, in addition to changing the mortgage pricing benchmark interest rate to LPR, you also need to select the effective period of the LPR interest rate. The minimum period is 1 year and the maximum period is the entire loan life. Of course, each user can only convert the mortgage interest rate to LPR interest rate once, and it cannot be changed after the conversion is successful.

After the implementation of the LPR interest rate, will the mortgage loan increase or decrease?

After the implementation of the LPR interest rate, the mortgage loan may increase or decrease. The specifics will be determined based on the adjustment range of LPR interest rate. For example:

On April 20, 2020, the one-year loan prime rate (LPR) was reduced by 20 basis points, and the loan prime rate (LPR) of more than five years was reduced by 10 basis points. According to calculations, due to the different implementation of interest rates across the country, based on the benchmark interest rate, taking a 30-year equal principal and interest loan of 1 million yuan as an example, the monthly payment after this reduction will be 5,156.37 yuan. Compared with 5,216.47 yuan in March, the monthly mortgage payment can be About 60 yuan less. Starting from January 1, 2020, loan interest rates for loan contracts other than provident fund loans will no longer be priced with reference to the loan benchmark interest rate. Instead, the LPR interest rate will be used as the pricing basis. Old contracts that have taken effect from March 1 to August 31 will also be converted to use the LPR interest rate as the pricing basis. The LPR interest rate changes frequently. If you are worried, you can also convert it to a fixed interest rate.

Why has the mortgage rate not changed if the LPR interest rate has changed?

The reason why the mortgage interest rate has not declined after the LPR interest rate decreases:

The user’s mortgage interest rate implements the LPR fixed interest rate, so the mortgage interest rate will not be adjusted when the LPR interest rate decreases; the LPR decrease is not the 12 last year The LPR for the month was lowered, and the mortgage interest rate LPR for the second year refers to the LPR in December of the previous year. The LPR has been lowered before, and the mortgage interest rate will not be adjusted this time.

Therefore, the reduction of mortgage interest rates must meet two conditions at the same time, that is, the user's mortgage interest rate implements the LPR floating rate, and the LPR is reduced in December of the previous year. Then in the second year, the user's mortgage interest rate will Follow the LPR downward adjustment. Most users choose to adjust the mortgage interest rate once a year, so the effective period of this adjustment is one year. In the third year, the LPR needs to refer to the LPR in December of the second year.

When the LPR decreases and the user’s mortgage interest rate is adjusted accordingly, the mortgage interest that the user needs to pay will be reduced. Of course, if LPR can be lowered, there is a certain probability that it will rise. Users need to be able to accept the risk of the increase.

The LPR interest rate is adjusted once a month, but this does not mean that the mortgage interest rate based on LPR is also adjusted every month. The user's mortgage interest rate pricing cycle can be negotiated with the lending bank. The shortest time period is 1 year and the longest is the contract period. For example, if the agreed period is 1 year, then the mortgage interest rate will be calculated according to the same LPR within 1 year. After 1 year, the pricing base interest rate will be adjusted to the LPR of the corresponding period in the latest month.

The mortgage interest rate repricing method is the same, that is, the loan interest rate is adjusted on the 1st of each month.

The full name of LPR interest rate is the central bank's basic interest rate LPR, which means that the central bank implements the LPR interest rate as the benchmark interest rate for loan pricing. Banks can only increase this interest rate and cannot lower it. The LPR interest rate is based on the same quotation from 18 banks, removing the highest value and the lowest value, and then taking the average value. After the LPR is lowered, will the monthly mortgage payment be lowered?

How much will the mortgage loan be reduced if LPR is reduced?

The two key points for the reduction of mortgage interest rates with the LPR interest rate are:

1. The mortgage interest rate is priced using the LPR fluctuation interest rate in commercial loans, and the mortgage interest rate = LPR interest rate + plus One point, to what extent can LPR be lowered? The mortgage interest rate can only be lowered to the standard value of LPR + one point.

2. The LPR interest rate can be adjusted 12 times a year and is updated on the 20th of each month. However, the change cycle of mortgage interest rates is generally once a year and is reset on January 1st of each year. During the same period of the upgrade in December, lpr+ will be obtained by adding one point. Therefore, after the LPR is lowered, it is unknown whether housing loans will be lowered, when they will be lowered, and how much they will be lowered.

For example

Suppose the loan cost is 200,000, the loan is borrowed for 20 years, the principal is repaid in equal amounts, the LPR floating interest rate is used for pricing, and a fixed rate of 0.1% is added. It will change. The effective interest rate for housing loans in 2022 is 4.75%, and the repricing number is January 1 of each year. Let’s do this:

1. If the updated 5 is updated on December 20, 2022 The LPR interest rate for years and above is 4.3%. In this way, after the repricing on January 1, 2023, the effective interest rate for a new housing loan for the whole year will be = 4.3% + 0.1% = 4.4%, and the mortgage interest rate will be reduced by 0.35%.

2. In 2022, the mortgage interest rate is 4.75%, and the monthly payment is 1,292.45 yuan. However, in 2023, the new interest rate is 4.4%, the monthly payment is 1,254.53 yuan, and the monthly mortgage payment is reduced by 37.92 yuan.

Is it feasible to pay off the loan early if the interest rate is lowered?

If you want to save loan interest, then even if the interest rate drops, it is appropriate to repay the loan early.

The reasons are:

1. The mortgage interest rate reduced by the interest rate reduction is far less than the interest saved by repaying the loan in advance, and the faster the loan is repaid in advance, the greater the interest savings.

For example:

For a 500,000 yuan loan with principal and interest for 30 years, with equal principal repayments, the mortgage interest rate is reduced from 4.85% to 4.75%. This 0.1% reduction can reduce the total loan interest It’s only 10,000 yuan, but if you repay it 20 years in advance, you can save more than 200,000 yuan in total annual interest.

2. After the LPR interest rate is lowered, the mortgage interest rate cannot be lowered immediately. It is usually changed once a year.

For example:

The mortgage interest rate is priced again on January 1 every year. Refer to the updated LPR interest rate in December last year, plus an extra point to get a new pricing. , which will not change in the subsequent year.

In other words, no matter how the LPR interest rate is lowered during the year, the mortgage interest rate will not change accordingly and can only be adjusted on the repricing day. If the LPR interest rate rises during the early adjustment period, the mortgage interest rate will also rise accordingly, except that the loan interest may be higher than before.

Therefore, no matter whether the interest rate is lowered or not, if you want to save loan interest and have sufficient self-raised funds, it is more appropriate to repay the loan early.

The above is the relevant introduction to "Is it feasible to pay off the loan early if the interest rate is lowered?" I hope you can help everyone.