On February 20, the central bank announced the latest LPR**, and the 1-year ** remained at 345% unchangedLPR** for maturities of more than 5 years was lowered by 25 basis points from 420% to 395%, the largest decline in history.
Experts pointed out that the sharp interest rate cut of LPR with a term of more than 5 years will help areas with clear long-term capital needs, and will produce significant cost reductions to avoid purchasing power wait-and-see. In the future, mortgage interest rates may continue to decline, and the property market may gradually open up.
The LPR asymmetry adjustment is reasonable
After five consecutive months of inactivity, the Loan Market** Rate (LPR) was lowered again on 20 February. The reporter of "International Financial News" notedIt was also the largest drop in the central bank's statistics since January 2019.
Source: People's Bank of China**).
In fact, the market has been waiting for this LPR rate cut for a long time. Since the end of January, there have been frequent policy actions: the re-lending and re-discounting rates for supporting agriculture and small enterprises have been lowered by 0 each25 percentage points, the reserve requirement ratio of financial institutions was lowered by 05 percentage points. At the press conference held by the press office on January 24, Pan Gongsheng, governor of the central bank, clearly pointed out that the RRR cut and the reduction of the rediscount rate "will help to promote the loan market interest rate, which is the benchmark for credit pricing, which is what we call the LPR downward." In terms of the market, a number of institutions have recently released research reports, giving clear expectations for interest rate cuts.
Why the asymmetric rate cut this time?
The one-year LPR is still holding back, mainly due to the reduction of deposit interest rates and reserve requirement ratios in the early stage, the central bank's open market net release, and the release of low-cost funds such as PSL (Collateral Supplementary Loan), which are relatively abundant in bank funds. However, the LPR with a maturity of more than 5 years has dropped significantly, which is intended to reduce the interest rate of medium and long-term loans. Li Yujia, chief researcher of the Guangdong Provincial Housing Policy Research Center, told reporters, "This year, the pressure to stabilize employment and steady growth has increased, and the policy focus has returned to the loose framework, but based on the consideration that residents' employment and income expectations are relatively weak, the policy is not only stimulated on the demand side, but more important is to reduce costs, and this one-time reduction of 25 basis points is based on the consideration of cost reduction." The combination of cost reduction and stable employment and stable expectations can motivate residents to release their consumption potential and desire. ”
The asymmetric adjustment of LPR is actually reasonable and should be the norm, reflecting that LPR is closer to the market. The adjustment will mainly help areas with clear long-term capital needs, including the restructuring of urban investment bonds, real estate restructuring, and industrial restructuring. Li Nan, an associate professor at the Advanced School of Finance of Shanghai Jiao Tong University, told reporters.
There is no shortage of short-term liquidity in the market at the moment. Li Nan said bluntly, "On the one hand, the loose monetary policy has been implemented for three years, and the amount of money in the market is sufficient, and common short-term liquidity reservoirs such as ** have shown that short-term liquidity is excessive." On the other hand, 2024 is a period of economic recovery, and long-term funds are required for industrial restructuring, emerging industries, debt adjustment of urban investment bonds, and debt adjustment of real estate loans. ”
Mortgage rates may continue to fall
It is worth noting that on February 18, the People's Bank of China launched a 105 billion yuan open market reverse repurchase operation and a 500 billion yuan medium-term lending facility (MLF) operation, with interest rates of 180% and 250%, the same as the previous period. In terms of formation mechanism, LPR is generated with MLF as the anchor point and points added on the basis of its interest rate.
The MLF-LPR linkage mechanism does not mean that the two need to be adjusted by equal amplitude, and there have been three previous cases where MLF remained unchanged and LPR was reduced. Wang Yifeng, chief banking analyst of Everbright Bank, told reporters, "Summarizing the commonality of the three LPR adjustments, the liquidity environment during the period was relatively loose, and there were 'easy money' operations such as RRR cuts in the month or in the early stage, which promoted the reduction of the cost of funds on the bank's liability side, and then provided operational space for the LPR reduction." The stability of the 'price' and 'volume' of MLF in February was mainly due to the constraints of the RMB exchange rate, and at the same time, it also released a signal that the central bank still has a strong incentive to maintain abundant market liquidity. ”
As the main reference benchmark for the pricing of medium and long-term corporate loans and personal housing loans, LPR** with a term of more than 5 years affects the hearts of many home buyers. After the announcement of LPR** on the 20th, the entry "housing loan is going to drop again" once rushed to the top three on the Weibo hot search list, "1 million housing loans are repaid less than 5 in 30 years."20,000" also sparked heated discussions.
So,What impact will the LPR reduction over 5 years have on the mortgage market?
In Li Yujia's view, the fundamentals of the demand side of the current market property market are still weak, and residents are expected to increase leverage to buy houses.
After a one-time reduction is in place this year, it is unlikely that the LPR will be lowered in the future, and the mortgage interest rate will continue to fall. In January 2024, the average interest rate of the first mainstream mortgage in Baicheng is 384%, and the average interest rate of the second set of mainstream mortgages is 441%。Considering that mortgage rates fell not much last year, there is at least a 30 basis point drop in first and second home loans this year. Li Yujia further analyzed.
After this reduction, the current lower limit of the loan interest rate for the purchase of the first home and the second home has been reduced to 375% (LPR over 5 years - 20 basis points.) 15% (LPR + 20 basis points for more than 5 years), further close to the lowest point in history, the mortgage interest rate in some cities has fallen to the lowest level in history, and only the first home loan interest rate in a few areas is higher than 4% (after this adjustment, the first home loan interest rate in the six districts of Beijing is 4.).05%）。Chen Wenjing, director of market research at the China Index Research Institute, pointed out, ".After the sharp reduction of LPR for more than 5 years, the cost of home buyers has decreased, which is expected to strengthen the effect of core city policies, and the property market may gradually open up.