Existing home loan interest rates are making a big move! Several major banks have announced: Bulk adjustments on October 25th!

On October 10, Industrial and Commercial Bank of China announced that starting from October 25, 2024, the interest rates of existing housing loans meeting certain conditions will be uniformly adjusted in batches to no less than the Loan Prime Rate (LPR) minus 30 basis points.

On the same day, Industrial and Commercial Bank of China, Bank of Communications, China Merchants Bank, Shanghai Pudong Development Bank, Zhejiang Rural Credit Cooperative Bank, Industrial Bank, and several other banks also released a FAQ on the adjustment of existing housing loan rates, stating that the adjustment of existing housing loan rates will be completed by October 31.

In fact, the "Initiative on Batch Adjustment of Existing Housing Loan Rates" issued by the People's Bank of China's Market Interest Rate Pricing Self-discipline Mechanism has clearly stated that commercial banks should generally implement batch adjustments to existing housing loans (including first homes, second homes, and above) by October 31, 2024.

In response to core questions such as "who can adjust" and "how much to adjust," many banks have also provided answers.

Question 1: Who can participate in the adjustment?

1. All first homes, second homes, and above existing commercial individual housing loans that meet the requirements of the "People's Bank of China Announcement [2024] No. 11" and the Initiative will be adjusted. Existing housing loans that have already been adjusted for point increments in 2023 are also included.

2. If the interest rate adjustment of the housing loan is higher than "-30BP" and higher than the lower limit of the current policy for new commercial individual housing loans in the city (if any), it falls within the scope of this batch adjustment of existing housing loan rates.

3. According to the "Notice of the People's Bank of China on Adjusting the Policy of Commercial Individual Housing Loan Rates," the policy lower limit for first and second homes at the national level has been abolished. Currently, except for certain cities (Beijing, Shanghai, Shenzhen), the majority of cities no longer have policy lower limits.

4. If the housing loan interest rate is equal to or lower than LPR-30BP, then the most favorable rate under the current policy is already enjoyed, and it is not within the scope of this adjustment.

5. Housing provident fund loans are not included in the adjustment scope.

6. This batch adjustment of existing housing loan rates only applies to commercial individual housing loans. Loans for commercial properties (including mixed-use properties and shops) are not included in this adjustment.

Question 2: Can loans priced at fixed/base rates participate in the adjustment?

In the latest Q&A, Industrial and Commercial Bank of China pointed out that for loans currently priced at fixed/base rates, customers need to apply to convert to floating rates first, and then proceed with the adjustment of existing rates.

For example, if a customer's first home loan is currently priced at a fixed rate of 4% and they apply to convert to a floating rate on October 15, with the 5-year LPR at 3.85% at the time of conversion, the post-conversion rate will be LPR+15BP. The interest rate adjustment on October 25 will be uniformly adjusted to LPR-30BP.

Question 3: How low can housing loan rates go?

Scenario 1: Existing housing loans with rates higher than LPR-30BP (excluding Beijing, Shanghai, Shenzhen) will be uniformly adjusted to LPR-30BP.

Scenario 2: First home loans in Beijing, Shanghai, Shenzhen with rates higher than LPR-30BP will be uniformly adjusted to LPR-30BP Scenario Three: For second home mortgages in Beijing, Shanghai, and Shenzhen with interest rates higher than the local minimum mortgage interest rate policy, they will be uniformly adjusted to the local minimum mortgage interest rate policy —

1. In Beijing, the minimum interest rate for second homes within the Fifth Ring Road is LPR-5BP, and outside the Fifth Ring Road is LPR-25BP;

2. In Shanghai, the minimum interest rate for second homes in the Free Trade Zone, Lingang New Area, Jiading, Qingpu, Songjiang, Fengxian, Baoshan, and Jinshan districts is LPR-25BP, while in other districts it is LRP-5BP;

3. In Shenzhen, the minimum interest rate for second homes is LPR-5BP.

Question Four: How much money can be saved on monthly mortgage payments after the interest rate adjustment?

ICBC mentioned two cases in the latest Q&A:

Case 1

Xiao Zhang owns a property in a second-tier city, with the current mortgage interest rate at LPR without any markup, i.e., 3.85%. After the adjustment, the mortgage interest rate is LPR-30BP. Assuming the LPR remains unchanged at 3.85% for terms over 5 years, the new interest rate is 3.55% (=3.85%-0.3%), a decrease of 30BP, or 0.3%. Taking a loan amount of 1 million RMB, a 30-year term, and equal principal and interest payments as an example, the monthly repayment before the adjustment is around 4688 RMB, and after the adjustment, it is around 4518 RMB. Xiao Zhang can save about 170 RMB per month, with a total interest savings of about 61,000 RMB.

Case 2

Xiao Li owns a property in a first-tier city, with the current mortgage interest rate at LPR+55BP (the first home mortgage policy at the time of loan issuance), i.e., 4.4%. After the adjustment, the mortgage interest rate is LPR-30BP. Assuming the LPR remains unchanged at 3.85% for terms over 5 years, the new interest rate is 3.55% (=3.85%-0.3%), a decrease of 85BP, or 0.85%. Taking a loan amount of 1 million RMB, a 25-year term, and equal principal and interest payments as an example, the monthly repayment before the adjustment is around 5502 RMB, and after the adjustment, it is around 5033 RMB. Xiao Li can save about 469 RMB per month, with a total interest savings of about 140,600 RMB.

Currently, ICBC, ABC, and BOC have clearly stated that customers (in principle) do not need to submit relevant application materials, and the banks will uniformly adjust by batch before October 31; CCB has not clearly stated whether application materials are required, but also mentioned that the batch adjustment will be completed before October 31, 2024.

It should be noted that the bank-level uniform batch adjustment only involves adjusting the interest rate markup, and the final adjusted interest rate depends on the latest LPR quotation announced on October 21. Therefore, consumers should also pay attention to the repricing date specified in the contract.

Below are examples of post-adjustment interest rates with different repricing dates for mortgages in different ranges:

ICBC also mentioned this in related hot Q&A. ICBC stated that since this interest rate adjustment only adjusts the LPR markup and does not adjust the loan repricing date, and different customers have different repricing dates (which could be January 1 of the following year or the loan disbursement date), the loan interest rate may not be repriced during the batch adjustment, and the loans may use one of three possible LPR values for terms over 5 years: 4.2%, 3.95%, or 3.85% After the batch adjustment of existing housing loan interest rates, there may be some differences. On the loan repricing date, after the loan is repriced, the interest rates of loans participating in this batch adjustment will be adjusted to the same level.

Source: Securities Times, Original Title: "Major News on Existing Housing Loan Interest Rates! Major Banks have Announced Batch Adjustment on October 25th!"