Original Liu Xiaobo
Today(February 9), the Huizhou Daily, published, reported a remarkable news: Huizhou mortgage interest rate, significantly reduced by about 100 basis points!
According to Huizhou Daily:
1. After the central bank lowered the interest rate on January 20, the banking institutions in Huizhou generally lowered the mortgage interest rate from January 21, of which the minimum interest rate of the first suite was reduced to 5.2%, the minimum interest rate of the second suite was reduced to 5.35%, and the lending speed was also accelerated compared with 2021.
2. At the end of December 2021, from the sample of nearly 70 real estate for sale in guangdong World Union Bank, in the new housing market, the interest rate of the first home loan of huizhou mainstream bank was 6.0%-6.7%, and the interest rate of the second home loan was between 6.2% and 7.5%.
As can be seen from the above statement, compared with December last year, the interest rate of the first home loan in Huizhou has been roughly reduced by 80 basis points to 150 basis points; the interest rate of the second home loan has been reduced by 85 basis points to 215 basis points.
The central bank has cut interest rates twice in the past.
Once, on December 20, only the 1-year LPR rate was lowered by 5 basis points.
The second time, on January 20, was a 10 basis point cut for the 1-year LPR and 5 basis points for the 5-year LPR. (See figure below)
The 1-year LPR is the reference interest rate for loans to the real economy, and the mortgage interest rate mainly refers to the 5-year LPR.
With only 5 basis points of cumulative rate cuts for 5-year LPR, how did the Huizhou mortgage rate achieve an 80 to 215 basis point rate cut?
Mainly by lowering the "plus point".
When commercial banks issue loans, they take the LPR interest rate as the benchmark, consider their own costs, profits and regulatory policies and other factors, and can issue their own "plus points" when reporting to local central bank branches.
That is to say, Huizhou has previously implemented a "targeted interest rate hike" for mortgage interest rates, and the "plus point" is relatively high, and now there is a large space to reduce the "plus point".
The picture above is the mainstream mortgage interest rate in major cities released by The Shell Research Institute in October 2021, when the mortgage interest rate in Huizhou was higher.
Looking at the whole country, the mortgage interest rate in Huizhou at that time was also very high. The interest rate of the first home loan is the highest in the country, and the interest rate of the second home loan is among the top three in the country.
Huizhou has always been a city with a large supply of new houses in Guangdong, and the increase in house prices is not high, why is the loan interest rate significantly higher in the country? This probably has to do with two reasons:
First, this is the property market regulation and control means chosen by Huizhou.
Huizhou has not been strict purchase restrictions, but last year for Huiyang, Daya Bay introduced a purchase restriction policy, outsiders can unconditionally buy 1 set.
In recent years, with the heating up of the Shenzhen metropolitan area and the expected expansion of Shenzhen, many outsiders have poured into Huizhou Linshen to find investment opportunities. New houses in Huizhou, especially in the Linshen area, often more than 70% are purchased by outsiders, of which Shenzhen people account for the largest proportion.
The supply of the Huizhou property market is large, and there is no need to introduce a strict purchase restriction policy. But what to do if you want to regulate the property market? Targeted interest rate hikes are an important choice, so Huizhou mortgage interest rates are the highest in Guangdong Province and basically the highest in the country.
Second, Huizhou is one of the few cities in the country where the balance of loans exceeds the balance of deposits, and the funds are relatively tight.
According to the latest data from the Huizhou Bureau of Statistics:
At the end of December, the balance of local and foreign currency deposits of Huizhou financial institutions was 780.967 billion yuan, an increase of 7.9%, and an average growth of 9.1% in two years.
The balance of local and foreign currency loans of financial institutions was 847.886 billion yuan, an increase of 18.0%, an average increase of 20.4% in two years.
It can be seen that the loan-to-deposit ratio of Huizhou financial institutions has reached a staggering 108.6%, and the loan growth rate is very fast.
In Shenzhen, which is close to Huizhou, deposits in December were 12.25 trillion yuan, and the balance of loans was 7.72 trillion yuan, with a loan-to-deposit ratio of 68.6%.
That is to say, for every 100 yuan of deposits attracted by financial institutions in Shenzhen, only 68.6 yuan was lent out; while the Huizhou financial institutions lent out 108.6 yuan for every 100 yuan of deposits attracted!
Huizhou's loan-to-deposit ratio obviously exceeded the standard, and it is estimated that part of the funds were supported by Shenzhen (internal allocation of commercial banks). Huizhou has less funds and large demand, so it is naturally more expensive.
Huizhou's "targeted interest rate cut" for the property market is extremely large, averaging about 100 basis points. You know: Historically, every standard rate cut by the central bank has been only 25 basis points. In the last two or three years, each rate cut has often been only 10 basis points and 5 basis points.
In contrast, a 100 basis point rate cut is definitely an "unprecedented deal"!
Why is there such an amazing "targeted rate cut"? It is closely related to the current downturn in the property market.
According to the data released by the "Kerry Research Center", during the Spring Festival this year (two weeks) 40 key monitoring cities were in a downturn in the property market, and there was no significant "homecoming wave" in third- and fourth-tier cities:
There is no Huizhou data in the above table, and I have not searched for accurate transaction data for January 2022 in Huizhou on the Internet. Predictably, the property market is very cold.
According to Leyoujia's data: in the past 5 years, most of the first-hand residential transactions in Huizhou remained in the range of 130,000-150,000 units, while in 2021, only 99,879 units (first-hand residences) were traded, down more than 30% month-on-month.
Leyoujia's data also shows that the largest buyer in the new housing market in Huizhou is Shenzhen, accounting for 58% in 2021; Huizhou locals account for 20%, ranking second; Dongguan people account for 16%, ranking third; Guangzhou people account for 1%.
Guangzhou people do not like to buy Huizhou because their own Zengcheng and Conghua are unlimited, and Guangzhou people prefer to buy property in Foshan.
What does Huizhou mean by the sharp "interest rate cut" for the property market? What are the implications?
In fact, as early as the end of last year, I predicted that the property market would face a "double interest rate cut" this year.
That is to say, in terms of LPR (equivalent benchmark interest rate), the central bank will have a slight interest rate cut; on the "plus point", there will also be different degrees of interest rate cuts everywhere. And at the time, I also judged that there was more room for "additional interest rate cuts", possibly several times the rate cut of the 5-year LPR.
Many cities have "increased interest rates" on mortgage rates in the past two months, such as in Beijing, where the interest rate on the first home mortgage has been reduced from 5.2% to 5.15%, and the interest rate for the second home has been reduced from 5.7% to 5.65%. The minimum interest rate for first-home loans in Shenzhen has dropped to 4.9%, and the minimum interest rate for second-home loans has dropped to 5.2%.
However, a rate cut of about 100 basis points like Huizhou has not appeared before.
If a buyer takes out a loan of 1 million yuan to buy a house in Huizhou, the loan will be made for 30 years using the same amount of principal and interest. If interest is calculated at 6.2% before the rate cut, the mortgage situation is:
If the mortgage method and the number of years remain unchanged at the 5.2% interest rate after the rate cut, it is:
The total repayment amount can save more than 200,000 yuan, which shows that the gap is very large.
So, can buyers who have previously bought a house in Huizhou and are already in the mortgage enjoy this interest rate cut?
Due to this interest rate cut, mainly due to the reduction of the "plus point" to achieve, so the previous buyers basically can not enjoy this rate cut.
The central bank's 5 basis point rate cut for the 5-year LPR on January 20 is based on the principle that after January 1 next year, the existing mortgage can be enjoyed, but the discount is much smaller.
The magnitude of the "extra point" is to maintain the entire mortgage process, unless the central bank issues a policy "amnesty". Similar "amnesties" (discounts on interest rates on existing mortgages) have historically appeared, but very few.
Huizhou has set a precedent for the property market to vigorously "cut interest rates". I believe that there will be more cities in the future to give mortgages a sharp "interest rate cut"!