Text/Leju Finance Wang Min
Mortgage interest rates have dropped again.
On July 22, the People's Bank of China authorized the National Interbank Lending Center to announce that the loan market quotation rate (LPR) on July 22, 2024 is: 1-year LPR is 3.35%, 5-year LPR is 3.85%, and the above LPR is valid until the next LPR is issued.
Both the 1-year and 5-year LPRs fell 10bp from the previous month and hit new record lows, at 3.45% and 3.95% respectively in the previous month.
It is worth noting that the Loan Prime Rate (LPR) had remained unchanged for four consecutive months prior to July.
This adjustment is the second rate cut this year. Previously, on February 20, the People's Bank of China announced that it would adjust the 5-year LPR from 4.2% to 3.95%. Since then, the LPR has remained unchanged for four consecutive months.
It can be said that LPR is the main reference benchmark for loan interest rate pricing, and it is also the pricing "anchor" of personal housing loan interest rates. The rate cut means that mortgage rates are at an all-time low.
According to industry analysts, the central bank lowered the one-year and five-year loan prime rate (LPR) by 10 basis points. If calculated based on the commercial loan amount of 1 million yuan, the loan for 30 years, and the repayment of equal principal and interest, the LPR will decrease by 10 basis points, the monthly payment will be reduced by 57.3 yuan, and the cumulative monthly payment for 30 years will be reduced by 21,000 yuan.
Wang Qing, chief macro analyst of Oriental Jincheng, said that the reduction of LPR quotations in July will drive further downward interest rates on corporate loans and residential mortgages in the third quarter. This will effectively reduce the financing cost of the real economy, expand domestic demand, it is expected that after the reduction in July, the LPR quotation will remain stable in the short term, and the fourth quarter depends on the economic and price conditions, the LPR quotation still has some room for reduction.
Yan Yuejin, research director of the E-House Research Institute, said that in addition to the traditional reduction of capital costs, support for the real economy, and play a counter-cyclical adjustment role, the interest rate cut has also created a very good monetary and financial environment for the new journey of Chinese-style modernization, and has a positive effect on enhancing the vitality of the real economy in the future.
Yan Yuejin also believes that the interest rate cut is a "double reduction", that is, the 1-year and 5-year LPR have been reduced, which fully shows that the interest rate cut is comprehensive, which has a positive effect on the use of funds in the short term and medium and long term. The 5-year LPR rate cut will help further reduce the cost of housing loans.
In the long run, this rate cut will help boost market expectations and confidence.
Xue Hongyan, vice president of Xingtu Financial Research Institute, said that as far as the real estate market is concerned, the important constraint affecting the stabilization of housing prices is the high rent-to-sale ratio, and it is difficult for rent income to cover interest costs. With the start of a new cycle of interest rate cuts, a larger proportion of rental income can cover interest costs, which can enhance the attractiveness of properties and help stabilize home prices.
On the same day, the People's Bank of China announced a joint reduction in the interest rate of the Standing Lending Facility (SLF), which will be adjusted to 2.55%, 2.70% and 3.05% respectively for overnight, 7-day and 1-month standing lending facilities from July 22, 2024.
In terms of the extent of adjustment, the adjustment of the standing lending facility rate refers to the 7-day reverse repo rate and the LPR (loan prime rate), and the reduction is 10 basis points.
(Source: People's Bank of China WeChat public account)
In addition, at about 8:22 a.m. on the same day, according to the official WeChat news of the People's Bank of China, in order to optimize the open market operation mechanism, from now on, the 7-day reverse repo operation in the open market will be adjusted to a fixed interest rate and quantity bidding. At the same time, in order to further strengthen counter-cyclical adjustment and increase financial support for the real economy, from now on, the interest rate of 7-day reverse repo operation in the open market will be adjusted from the previous 1.80% to 1.70%.
(Source: People's Bank of China WeChat public account)
At 8:30, the People's Bank of China issued another announcement that in order to increase the scale of tradable bonds and ease the pressure on supply and demand in the bond market, starting from this month, medium-term lending facility (MLF) participants who have the need to sell medium- and long-term bonds can apply for a phased reduction of MLF pledges.
According to the analysis of industry insiders, the continuous decline in the current round of long-term bond interest rates has included the expectation of this interest rate cut, and even has a significant overshoot, which does not mean that it is necessary to follow the downward trend of the 7-day reverse repo operation interest rate and then continue to fall. It is expected that in the future, the central bank will also take comprehensive measures, borrow and sell treasury bonds when necessary, correct and block the accumulation of bond market risks in a timely manner, and maintain a normal upward slope yield curve.
On the same day, the Ministry of Finance also announced the fiscal revenue and expenditure for the first half of 2024. Among the land and real estate-related taxes, the deed tax was 277.9 billion yuan, down 10.9% year-on-year; real estate tax was 233.7 billion yuan, a year-on-year increase of 20.1%; urban land use tax was 129.8 billion yuan, a year-on-year increase of 11%; land value-added tax was 307.4 billion yuan, down 4.3% year-on-year; The cultivated land occupation tax was 84 billion yuan, a year-on-year increase of 22.6 percent.
Zhong Linnan, a senior macro analyst at GF Securities, believes that the transition to the interest rate control framework is a long-term process, and the current cultivation of policy interest rates and the combing of the relationship between policy interest rates and market interest rates have achieved initial results.