The LPR** for the first month of the year is released: 1-year LPR**345%, and LPR for more than 5 years is 42%。Following the downward adjustment in August last year, the 1-year LPR has been "on hold" for 5 consecutive months; The 5-year LPR has been "standing still" for 7 consecutive months. LPR** is anchored by the MLF interest rate, and the MLF continued to be "volume increase and price parity" in January, and the pricing basis of LPR** has not changed. So,What are the implications of the LPR adjustment? What signal does this round of ** unchanged release? What does the future hold?
LPR interest rate = MLF interest rate + **markup, **markup is jointly determined by representative commercial banks. The MLF interest rate directly affects the ** of the LPR, due to the overall positive fundamentals, in order to calm market fluctuations, stabilize market expectations, and ensure the smooth operation of the financial systemAt the beginning of the year, the MLF operation continued to "increase volume and price parity", and the interest rate remained at 25% unchanged, coupled with the downward pressure on banks' net interest margins, makes the LPR** interest rate "stand still".
In addition, the number of LPR** banks has been expanded from 18 to 20, with the addition of China CITIC Bank and Bank of Jiangsu. This is the second time that the PBOC has adjusted the list of LPR** banks after the 2019 reform, and the adjustment will be implemented from January 22, 2024. The adjustment has increased the joint-stock system and local small and medium-sized banks, and expanded the scope of first-class institutionsIt is conducive to improving the benchmark of LPR and making the architecture more reasonable.
If LPR** continues to "stand still", will mortgage interest rates remain unchanged?
Not really. When it comes to LPR, many people think of mortgage interest rates. Although the two are closely related, there are still differences and cannot be directly equated.
LPR is closely related to the cost of financing for residents and businesses. Generally speaking, if the LPR is lowered, the lending rate will fall accordingly, and vice versa. LPR is divided into two varieties of 1-year and more than 5 years, the 1-year period determines the interest rate of the bank loan to the enterprise, if the 1-year LPR is lowered, the corporate loan interest rate will be reduced accordingly, which will stimulate the demand for corporate borrowing and reduce the financing cost of the enterprise; When the 5-year LPR is lowered, the commercial bank will reduce the benchmark interest rate of the housing loan, which is conducive to reducing the borrower's mortgage pressure.
Related to the mortgage interest rate is the five-year variety, the mortgage interest rate = 5-year LPR + a certain spread. If the LPR is more than 5 years, the interest rate is 420% and the spread is 05%, the mortgage interest rate is 420%+0.5%=4.7%, the spread is determined by the bank, not every customer is the same, once the spread is determined, the buyer will not change in the process of repaying the loan. For buyers who choose not to take out a fixed-rate mortgage, the reduction of LPR** is a good thing, as the new interest rate will fall and the interest will be reduced. However, the mortgage interest rate and LPR do not change simultaneously, and when applying for a mortgage, you need to agree with the bank on a repricing cycle, generally speaking, the shortest is 1 year, that is, the loan interest rate is adjusted once a year, which is generally set on January 1 of each year or the effective date of the loan contract.
With the LPR** continuing to remain unchanged at the beginning of the year, what is the direction of mortgage interest rates in January?
The 5-year LPR has remained stable for 7 consecutive months, but the mortgage interest rate is not "set in stone", but out of the relatively "independent" **. According to data from the Shell Research Institute, many cities have lowered mortgage interest rates, and the interest rates of the first and second sets of mainstream mortgages in the first month of the year have decreased by 26bp and 50bp respectively compared with the same period last year.
Under the pressure of the decline in economic and financial data and the narrowing of the net interest margin of commercial banks, the deposit interest rate has been lowered and the RRR has been reduced, and there is still some room for banks to cut interest rates.
Recently, there has been a lot of discussion in the market about the high level of real interest rates, and most of them believe that the rise in real interest rates should be mitigated by lowering the policy rate. Real interest rate = nominal interest rate - inflation rate, since October last year, the year-on-year increase in CPI has been negative, PPI year-on-year has been negative for 15 consecutive months, China's inflation level remains low, which leads to the rise of China's real interest rate, so the call for lowering the nominal interest rate is very high. In order to send an easing signal to boost market confidence and promote stable growth, the MLF interest rate has the possibility of a downward adjustment, thereby guiding the LPR to decline moderately.
Dong Ximiao, chief researcher of Zhaolian, saidIn the first quarter, the PBOC is still likely to cut nominal interest rates by 5 to 10 basis points and the reserve requirement ratio by 025 percentage points to further reduce the cost of funds for banks, guide LPR, especially LPR with a maturity of more than 5 years, to decline moderately, and help reduce the financing cost of operating entities. Overall, banks' net interest margins are under pressure, and the LPR** unchanged is in line with market expectations, but the fact that the LPR remains stable does not mean that mortgage rates will not fall. At present, there is still the possibility of interest rate cuts, which will drive the LPR to a moderate downward trend.
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