Latest Process Revealed for Mortgage Rate Reduction: Some Mortgages Automatically Adjusted without Application

The process of lowering interest rates on existing housing loans has attracted attention at every step.

With the publication of the detailed operational details, more questions are expected to be clarified.

What are the detailed criteria for applicants?

How will the adjustments be made?

Who should the application be submitted to?

When will it start?

What is the actual magnitude of the interest rate reduction?

And which types of housing loans will automatically have their interest rates lowered by banks without the need for individuals to apply.

These questions and more were answered on the morning of September 7th when the four major banks (Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, and China Construction Bank) released the detailed "Announcement on the Adjustment of Interest Rates for First-time Personal Housing Loans with Existing Stock"

Starting from September 25th

According to the announcement, the four major banks will make a centralized and batch adjustment of contract loan interest rates for existing housing loans that were originally subject to the first-time housing loan interest rate standard, starting from September 25, 2023.

After the batch adjustment, the new interest rate level will be implemented from that day onwards.

In addition, customers with existing housing loans who are converting their second home to a first home, repaying overdue principal and interest on non-performing loans, or currently subject to fixed interest rates or benchmark interest rate pricing, can apply to the bank starting from September 25, 2023.

For applications completed before October 22, 2023 (including that day), Industrial and Commercial Bank of China will make a centralized and unified interest rate adjustment for approved applications on October 25, 2023. The interest rate adjustment will be implemented from that day onwards, and the interest accrued prior to the adjustment will be calculated based on the original contract interest rate level.

Customers who apply for interest rate adjustment after October 22, 2023, including new customers converting their second home to a first home, repaying overdue principal and interest on non-performing loans, or currently subject to fixed interest rates or benchmark interest rate pricing for existing housing loans, can continue to apply to the bank. The bank will manually review each application, and once approved, the new interest rate level will be implemented from the next day onwards.

Some interest rate adjustments do not require application

According to the announcement, for existing floating-rate housing loans that were originally subject to the local first-time housing loan interest rate policy and are currently priced based on the Loan Prime Rate (LPR), the four major banks will proactively make a batch adjustment of loan interest rates according to the aforementioned adjustment rules.

For existing housing loans that were originally subject to the second home loan interest rate standard and currently meet the first-time housing loan interest rate standard in the city as described in this announcement, namely, existing housing loans that are converted from a second home to a first home, or existing housing loans for repaying overdue principal and interest on non-performing loans, customers need to actively apply to the bank for interest rate adjustment. After the bank's review and confirmation of eligibility, the loan interest rate will be adjusted according to the aforementioned rules.

For existing housing loans that are currently subject to fixed interest rates or benchmark interest rate pricing, customers need to actively apply to Industrial and Commercial Bank of China for interest rate adjustment. First, the loan will be converted to a floating-rate loan priced based on the Loan Prime Rate (LPR) in accordance with the relevant requirements of the People's Bank of China's Announcement [2019] No. 30, and then the loan interest rate will be adjusted according to the aforementioned rules. For special cases that require the use of a new loan replacement method, the loan service provider will contact the customer to handle it.

"First Home" Detailed Identification Criteria

From the announcement, in addition to the housing loans that meet the first home loan interest rate standards in the city where the loan was originally granted, this announcement further specifies the situations that can be identified as "conversion from second home to first home."

The situations that can be identified as first homes include:

When the house was purchased, the family did not have any other complete set of housing in the local area, but due to the local government's "recognize the house and recognize the loan" policy, the housing loan for that property was processed according to the second home loan interest rate standards. However, now the local government is implementing the "recognize the house but not the loan" policy.

When the house was purchased, it was not the family's only complete set of housing in the local area, but later, through transactions or other means, other complete sets of housing were sold, and this property became the family's only complete set of housing in the local area, and the local government is implementing the "recognize the house but not the loan" policy.

Other existing housing loans that meet the first home loan interest rate standards in the city.

Adjusted Interest Rates Depending on Loan Time

According to the announcement, for existing individual housing loans that meet the requirements of this announcement, the minimum adjustable interest rate can be adjusted to the lower limit of the first home loan interest rate policy in the city where the loan was originally granted. The specific adjustments are made based on the following situations.

1. Loans that were granted before October 8, 2019 (excluding that day) and have been converted to floating rate loans priced based on the Loan Prime Rate (LPR) as required by the People's Bank of China in Announcement [2019] No. 30, can be adjusted to the corresponding term LPR without any additional points. If the first home loan interest rate policy in the city where the loan was originally granted required adding points to the LPR, then that policy will be followed.

2. Loans that were granted from October 8, 2019 (including that day) to May 14, 2022 (including that day) and are priced based on the LPR, can be adjusted to the lower limit of the national first home loan interest rate policy, which means the corresponding term LPR without any additional points. If the first home loan interest rate policy in the city where the loan was originally granted was higher than the LPR, then that policy will be followed.

3. Loans that will be granted after May 14, 2022 (excluding that day) and are priced based on the LPR, can be adjusted to the lower limit of the national first home loan interest rate policy, which means the corresponding term LPR minus 20 basis points (BP). If the first home loan interest rate policy in the city where the loan was originally granted was higher than the LPR minus 20BP, then that policy will be followed.

4. For the historical adjustments of the lower limits of the first home loan interest rate policies in various cities, please refer to the announcements on the websites of the local branches of the People's Bank of China.

5. Loans that have been issued with an interest rate that is already at the lower limit of the first-home mortgage interest rate policy in the city, or loans that were issued before May 14, 2022 (including that day) and are currently subject to LPR floating rate pricing with an interest rate not higher than LPR, or loans that are issued after May 14, 2022 (excluding that day) with an interest rate not higher than LPR-20BP, or loans that still fall under the standard interest rate for second-home mortgages according to the latest policy in the city, will not undergo interest rate adjustments.

Application Channels

According to the ICBC announcement, borrowers have two channels to apply.

1. Online Channel: Mobile Banking

The bank's mobile banking supports "one-click application". The specific process is as follows: download the ICBC app - login/register - loans - adjustment of existing home loan interest rates - one-click application. For the application of "converting second-home mortgage to first-home mortgage", customers need to upload proof of the first-home mortgage loan. Customers with outstanding loans who need to repay the principal and interest and are currently subject to fixed interest rates or benchmark interest rate pricing for existing home loans do not need to upload proof of documents.

1. Offline Channel

Customers can use the "ICBC Customer Service" WeChat official account to click on "Financial - Personal Loans - Loan Service Hotline" to view the contact information of all loan service branches of the bank. They can go to the original loan service branch to apply for and handle the interest rate adjustment. For the application of "converting second-home mortgage to first-home mortgage", customers need to bring their ID card, proof of the first-home mortgage loan, and other documents.

No Interbank Replacement Supported

Regarding this adjustment, the four major banks suggest that customers prioritize applying through mobile banking, but there may be system congestion during the peak period of interest rate adjustments.

In addition, due to the large scale of interest rate adjustments, SMS notifications may be sent in batches and may have delayed delivery. There may also be cases where SMS notifications fail to be delivered due to customers not updating their contact information for mortgage business with the bank.

There will be no fees charged for this adjustment of existing home loan interest rates. Please do not believe phone calls or messages from individuals outside the bank.

This adjustment of existing home loan interest rates does not support interbank replacement. Please do not believe misleading information.