The People's Bank of China authorized the National Interbank Offering Center to announce that the loan market price on August 22, 2022 was: the 1-year LPR was 3.65%, a 5 basis point reduction, and the LPR for more than 5 years was 4.3%, a 15 basis point reduction.

The Paper reporter Ji Simin

htmlLPR over 05 years has ushered in the third adjustment this year.

The People's Bank of China authorized the National Interbank Funding Center to announce that the loan market quoted interest rate (LPR) on August 22, 2022 is: 1-year LPR is 3.65%, a decrease of 5 basis points, and 5-year and above LPR is 4.3%, a decrease of 15 basis points.

From a cumulative perspective, since this year, the 1-year LPR and the 5-year and above LPR have been reduced by 15 basis points and 35 basis points respectively. Among them, in May this year, the LPR with a maturity of more than 5 years was announced to be reduced by 15 basis points to 4.45%, which was the largest decrease since the implementation of LPR. This time, the LPR over 5 years was once again lowered by 15 basis points. Chen Wenjing, market research director of the Index Business Department of the China Index Research Institute, pointed out that as of August 2022, the LPR with a maturity of more than 5 years has been reduced by a total of 35 basis points, which is the year with the strongest interest rate reduction after the mortgage interest rate was anchored in the LPR with a maturity of more than 5 years in 2019.

For the real estate market, what better reflects the trend of mortgage loan interest rates is the LPR with a term of more than 5 years. As a reference benchmark for home loan quotations, adjustments to the LPR of more than 5 years affect home buyers' home loans. That is, a decline in LPR means a reduction in the monthly payment amount, which means that the cost of home purchase has been reduced.

According to regulations, the interest rate of newly issued personal housing loans shall not be lower than the LPR of the corresponding period (based on the LPR of more than 5 years on August 22, which is 4.3%); the interest rate of the second personal housing loan must not be lower than the LPR of the corresponding period plus 60 basis points (based on the LPR of more than 5 years on August 22, which is 4.9%).

This time, the LPR for more than 5 years has been lowered again, which is considered by the industry to be "in line with market expectations."

Yan Yuejin, research director of the Think Tank Center of Yiju Research Institute, pointed out that this further reduction in LPR is in line with market expectations. The previous MLF interest rate cut made everyone not surprised by this interest rate cut. However, the 15 basis points interest rate cut was slightly higher than expected, fully demonstrating the orientation and urgency of further reducing medium- and long-term capital costs.

Taking a mortgage loan with a loan amount of 1 million yuan and a 30-year equal principal and interest repayment as an example, before the interest rate adjustment, the LPR of the first personal home was 4.45%, and the monthly payment at this time was 5,037.19 yuan. After this interest rate adjustment, the LPR for a term of more than 5 years is 4.3%, and the monthly payment at this time is 4948.71 yuan. Based on this calculation, the monthly payment is reduced by approximately 88.48 yuan, and the total loan interest is reduced by approximately 31,900 yuan.

Judging from the cumulative reductions in LPR over five years since this year, under the same conditions, the monthly payment has been reduced by approximately 207.66 yuan. Lu Qilin, research director of

58 Anjuke Real Estate Research Institute, pointed out that the adjustment of the 5-year LPR is the third adjustment this year. After the previous two interest rate cuts, home buyers’ loan expenditures will be significantly reduced, which will promote the entry of home purchase demand and help the real estate market to bottom out and recover. For existing mortgage loan customers, their loan interest rate adjustments will mostly be reflected in the next interest accrual year. Jiang Han, a senior researcher at

Pangu Think Tank, pointed out that judging from the current decline in LPR, the short-term LPR has declined less, and the long-term LPR has declined more. It can also represent the current overall market expectations and push the interest rates of the entire market to develop in a more rational direction, so it shows different decline arrangements in the long and short term.

From the perspective of the development of the real estate industry, Jiang Han believes that the impact on the real estate market, especially the mortgage market, is very far-reaching. For those who are repaying mortgage loans, the decline in LPR can lower the overall benchmark interest rate, which can reduce the overall repayment pressure of those who are repaying mortgage loans, thus helping to increase disposable income levels. For the home purchase market, the decline in LPR can stimulate rigid demand in the home purchase market, increase the activity of the property market, and promote more buyers who are in urgent need to further enter the market.

Li Yujia, chief researcher of the Housing Policy Research Center of the Guangdong Provincial Institute of Urban Planning, also mentioned that this interest rate cut has a relatively large promotion effect on rigid demand, improvement demand, and housing replacement demand.

It is worth mentioning that at present, many places have implemented differentiated housing credit policies to support rigid and improved housing demand, and the interest rate for first home loans in many places has been reduced to 4.25%.

On May 15 this year, the People's Bank of China and the China Banking and Insurance Regulatory Commission issued the "Notice on Issues Related to Adjusting Differentiated Housing Credit Policies" stating that for households purchasing ordinary self-owned houses with loans, the lower limit of the commercial personal housing loan interest rate for the first home will be adjusted to no less than 20 basis points minus the market quotation rate of the loan for the corresponding period. The lower limit of the commercial personal housing loan interest rate policy for the second home will be implemented in accordance with the current regulations.

Subsequently, mortgage interest rates were lowered in many places on the basis of 4.45%, including Xinjiang, Qinghai Xining, Anhui Bengbu, Jiangxi Jiujiang, Jiangxi Yichun, Jiangsu Suzhou, Tianjin, Henan Zhengzhou, Shandong Qingdao, Shandong Jinan, Inner Mongolia Hohhot, Hebei Tangshan, Jiangsu Nantong, Guangdong Huizhou and other places where the first home loan interest rate dropped to 4.25%.

Shell Research Institute market analyst Liu Lijie said that this time the LPR for more than 5 years has dropped to 4.3%, the lower limit of first-home loan interest rates will be adjusted to 4.1%, and the lower limit of second-home loan interest rates will be reduced to 4.9%. In the future, banks will further expand the room for interest rate cuts on first-home and second-home loans.

Liu Lijie believes that local property market support policies will be further increased in August. Currently, most cities have low thresholds for home purchases, low interest rates, and low down payments. The policy environment on the demand side is generally loose, which helps boost market expectations. Practical improvements on the supply side in the later period, such as the orderly resumption of construction and handover of new housing projects and the accelerated resolution of debt risks of real estate companies, are the key to fundamentally restoring market expectations.

Editor in charge: Sun Fu Picture editor: Zhang Tongze

Proofreading: Shi Jun