- 2024-06-05
- News
LPR decreased by 25 basis points
On October 21st, the Loan Prime Rate (LPR) for this month was announced, with the one-year term at 3.1% and the five-year term at 3.6%, both down by 25 basis points from last month. As early as the end of September, I had informed everyone that the October LPR would definitely decrease, and by at least 20 basis points, because at that time, the 7-day reverse repo rate had dropped from 1.7% to 1.5%. This rate is the anchor set by the central bank at present, and other interest rates are benchmarked against it, rising and falling together.
Sure enough, the most recent one-year LPR and the five-year LPR, which is directly related to housing loans, fell by 0.25% as expected.
As is well known, housing loans in our country consist of two parts, which can be expressed by the following formula:
Housing loan interest rate = Five-year LPR + Fixed addition (which can be negative)
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Previously, the central bank and various commercial banks that issue housing loans have announced adjustments to the interest rates of existing housing loans, which are adjustments to the fixed addition. Except for second homes in Beijing, Shanghai, and Shenzhen, the fixed addition for all existing housing loan interest rates in other regions has been adjusted to -30 basis points. Therefore, the vast majority of housing loans have become: Five-year LPR - 0.3%.
Of course, if your housing loan's fixed addition was originally less than -30 basis points, it remains unchanged and will not increase to -0.3%.
The last time, the fixed addition was uniformly adjusted to -0.3%, and what was announced today is another part of the housing loan formula—the five-year LPR, which has changed from 3.85% in September to 3.6%. From this, we can calculate that except for second homes in Beijing, Shanghai, and Shenzhen, the highest interest rate for other existing housing loans is: 3.6% - 0.3% = 3.3%.
The adjusted interest rates for existing housing loans listed by various banks before were 3.55%, which was calculated based on the five-year LPR of 3.85%. Now that the five-year LPR has dropped to 3.6%, the interest rate for existing housing loans naturally follows suit and falls to 3.3%.
By the way, the commercial loan interest rate for second homes in the three first-tier cities is 3.35% (for the outskirts of Beijing and Shanghai) or 3.55% (for urban areas of Beijing and Shanghai, and the whole city of Shenzhen).
However, when everyone checks their housing loan interest rates, they will find that they are still the same as before. Not to mention adjusting to 3.35%, some second-home loan interest rates are still above 5%. What's going on? Please pay attention to three points.Firstly, if you previously chose a fixed interest rate and have not switched to a floating rate, then any matters related to the reduction of mortgage interest rates are irrelevant to you. Please hurry to switch to a floating interest rate. Generally, you can apply through your online banking app without needing to go to the loan branch.
Secondly, according to announcements from various banks, the adjustment date for the fixed spread by mainstream large banks is October 25th, after which the change in loan interest rates can be seen; some small and medium-sized banks have an adjustment date at the end of the month, and changes will only be visible in November.
Thirdly, even if the fixed spread is fully adjusted to -0.3% by the end of October, everyone's mortgage interest rate will still be different due to the different re-quoting dates for everyone's LPR.
Do you remember that the loan interest rate consists of two parts as mentioned earlier? The fixed spread generally never changes unless it is uniformly adjusted by the state, like in September last year and October this year, while the five-year LPR is adjusted once a year, and everyone's adjustment date is different.
For example, if Zhang San's mortgage adjustment date is January 1st each year, then the most recent adjustment will occur on January 1st, 2025; similarly, if Li Si's adjustment date is November 22nd each year, his mortgage's five-year LPR will be updated to the latest value next month.
Based on the different adjustment dates for the five-year LPR and the changes in LPR this year, I have organized the timing of mortgage changes for everyone in the coming months for your reference.
(1) Five-year LPR adjustment date is from January 1st to February 28th each year: Mortgages will first drop to 3.9% at the end of October, and then drop to 3.3% when the adjustment date comes next year.
(2) Five-year LPR adjustment date is from March 1st to July 31st each year: Mortgages will first drop to 3.65% at the end of October, and then drop to 3.3% when the adjustment date comes next year.
(3) Five-year LPR adjustment date is from August 1st to October 31st each year: Mortgages will first drop to 3.55% at the end of October, and then drop to 3.3% when the adjustment date comes next year.
(4) Five-year LPR adjustment date is from November 1st to December 31st each year: Mortgages will first drop to 3.9% at the end of October, and then drop to 3.3% when the adjustment date comes this year.The last category will undergo two adjustments within the remaining part of this year, with the loan interest rate falling from the current value to 3.3%, with a decrease ranging from tens of basis points to over 100 or even 200 basis points.
We can observe that everyone's final mortgage interest rate will be 3.3%.
Of course, the above analysis is based on the five-year LPR dropping to the current 3.6%. If it falls further in the future, the final interest rate will be even lower.
For example, assuming that the five-year LPR drops by another 10 basis points in December this year, changing from 3.6% to 3.5%, and a certain "mortgage slave" has an LPR re-pricing date of January 1st, his loan interest rate adjustment path will be as follows.
Adjusted to 3.9% by the end of October, and then reduced to 3.2% on January 1st next year.
This popular science article should have clarified all the issues related to mortgages, right? Most people will experience a "two-stage" reduction in their mortgage rates. The first stage is a decrease following the country's unified adjustment of fixed additional points, and the second stage is related to the individual's re-pricing date, with different adjustment dates for each person.
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