How much money can you save on your mortgage? State-owned major banks "clarify" the adjustment plan for existing housing loan interest rates

Since the announcement by the central bank governor on September 24 to require banks to lower the interest rates on existing housing loans, by how much have they been reduced? How are they being reduced? Questions about which customers may be eligible for a reduction in mortgage rates are lingering in the minds of the public.

Through the FAQs on mortgage rate adjustments released by several major banks, details of specific plans have begun to be gradually revealed.

Minimum Adjustment for Mortgage Rates: LPR-30 basis points

According to the common FAQs on mortgage rate adjustments released by several banks such as ICBC, CCB, SPD Bank, CMB, and BANKCOMM, the minimum adjustment for future mortgage rates is "LPR-30 basis points".

Considering that the latest LPR for terms over 5 years is currently 3.85%, if this rate level remains unchanged, the minimum adjustment for future mortgage rates may be 3.55%.

However, according to ICBC's clarification, due to different customers having different agreed-upon mortgage rates, there may actually be customers using three possible values for terms over 5 years (pricing benchmarks): 4.2%, 3.95%, and 3.85%, resulting in potential differences in bulk adjustments to existing mortgage rates.

First Home Loans Decrease, Second Home Loans Depend on Region

So, which customers will be included in this round of adjustments to existing mortgage loans?

According to announcements from multiple banks, the following mortgage customers will be eligible for rate reductions:

1. For all housing loan customers with their first home loan, when their mortgage rate is higher than "LPR-30BP", they are eligible for an adjustment to existing mortgage rates;
2. Apart from Beijing, Shanghai, and Shenzhen where second home loan policies are in effect, most other regions' existing housing loans can be adjusted to no less than LPR-30BP;
3. In regions where second home loan policies are in effect like Beijing, Shanghai, and Shenzhen, second home housing loans will be adjusted to the minimum under the current new mortgage rate policy;

Specifically, if the loan is in Beijing/Shanghai/Shenzhen and does not meet the "conversion of second home to first home" condition, according to the current minimum second home loan policy, the adjusted rate values will be: LPR-25BP outside the Fifth Ring Road in Beijing, LPR-5BP inside the Fifth Ring Road in Beijing; LPR-25BP in Shanghai Free Trade Zone, Lingang New Area, Jiading, Qingpu, Songjiang, Fengxian, Baoshan, and Jinshan districts, LPR-5BP in other areas; LPR-5BP across all of Shenzhen.

Rate Uniform Adjustment to be Completed by the End of October

ICBC's clarification notice also stated that ICBC's mortgage customers will undergo a unified adjustment on October 25th. Specific conversion rules and operational methods will be detailed in subsequent announcements.

Other banks have also indicated that they will conduct a unified bulk adjustment for eligible existing personal housing loans by the end of October 31st, with specific timing subject to detailed operational guidelines to be released later

Specific Implementation Depends on the "Reset Date" for Loans

The FAQ announcement from ICBC also indicates that the ultimate benefit of interest rate reduction for end customers will have to wait until the loan reset date.

Since this interest rate adjustment only involves adjusting the LPR plus or minus points and does not adjust the loan reset date, and different customers may have different loan reset dates (which could be January 1 of the following year or the loan disbursement date), loan interest rates may not be reset in bulk during the adjustment, and when the loan is reset on the reset date, the interest rates of loans included in this batch adjustment will be adjusted to the same level.

Bulk Adjustments Were Made Last Year as Well

Of course, this is not the first round of interest rate adjustments for existing housing loans.

From September to October 2023, there was also a round of housing loan interest rate adjustments for existing housing loans in mainland China.

Taking China Construction Bank's announcement at that time as an example, the announcement regarding specific matters related to the adjustment of interest rates for existing first-home loans showed that on September 25, 2023, China Construction Bank planned to uniformly adjust the contract interest rates for floating rate loans that met the criteria, with the new rates taking effect immediately. Customers who do not agree with the adjustment or intend to adjust through substitution can contact the loan handling institution.

For floating rate loans at that time, those disbursed before October 7, 2019 (inclusive), had their adjusted rates based on the corresponding term (original loan contract term) LPR rate.

For loans disbursed between October 8, 2019 (inclusive) and May 14, 2022 (inclusive), the adjusted rates were based on the lower limit of the national first-home loan rate policy, i.e., the corresponding term (original loan contract term) LPR rate; for loans disbursed between May 15, 2022 (inclusive) and August 31, 2023 (inclusive) or those already disbursed but contracts not yet signed, the adjusted rates were based on the lower limit of the national first-home loan rate policy, i.e., the corresponding term (original loan contract term) LPR minus 20 basis points