Caifin Oct. 12th News (Reporter Gao Ping): The detailed rules for adjusting existing house loan interest rates have been released. As of press time, the six major banks, including Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank Corporation, Bank of Communications, and Postal Savings Bank of China, have all disclosed specific adjustment rules today. According to the rules, for eligible existing house loans, the six major banks will uniformly adjust them in bulk on October 25th without the need for customer applications. Adjustments for existing fixed and benchmark interest rate loans will require a conversion to floating rates before adjustment.

Specifically, in areas such as Peking, Shanghai, and Shenzhen, where the interest rates are higher than LPR-30BP for first home loans and higher than LPR-30BP for all outstanding house loans in other areas, they will be uniformly adjusted to LPR-30BP. For second home loans in areas such as Peking, Shanghai, and Shenzhen, where the interest rates are higher than the corresponding policy floor, they will be uniformly adjusted to the local corresponding policy floor.

Industry insiders told Caifin reporters that this reduction in existing house loan interest rates is an important measure to reduce the cost of existing house loan interest rates and boost consumer confidence. It is expected to further reduce the asset-liability income gap for residents, alleviate the trend of early repayment, help stabilize the scale of bank assets, and improve consumer vitality at the resident level.

Existing house loan interest rates will be uniformly adjusted in bulk on October 25th to LPR-30BP for eligible cases.

According to the rules, existing house loans eligible for adjustment will be uniformly adjusted in bulk on October 25th without the need for customer applications. Regarding the specific range of loans to be adjusted this time, Agricultural Bank of China stated that the adjustment range includes first and second or higher issued house loans. Bank of China stated that the range includes existing commercial individual housing loans that have been issued. China Construction Bank Corporation stated that it involves existing commercial individual housing loans issued before October 25, 2024 (excluding) and contracts signed but not yet issued (including first and second or higher individual housing loans, and the commercial individual housing loan portion in provident fund combination loans).

Based on the adjustment rules, existing house loans meeting the criteria will be adjusted in bulk to LPR-30BP. For cities that still have policy floors in place, the adjusted markup after conversion will not be lower than the markup floor under the current interest rate policy for new house loans.

Specifically, Agricultural Bank of China stated that in areas where the markup above the loan market quoted rate (LPR) is higher than -30BP for existing house loans (including first, second, or higher homes), it will be adjusted to -30BP. For those with markup not exceeding -30BP above LPR, no adjustments will be made.

In Beijing, Shanghai, Shenzhen, and other areas where there is a lower limit on the new loan interest rate markup, for existing housing loans with a markup above -30BP based on LPR (including first, second and subsequent homes), the markup will be adjusted to -30BP and not lower than the lower limit of the new loan interest rate markup currently in effect in the city. For loans with a markup based on LPR that is not higher than -30BP or not higher than the markup lower limit, no adjustments will be made.

Regarding specific adjustment rules, Industrial and Commercial Bank of China concluded that for first-home mortgages in Beijing, Shanghai, Shenzhen, and other areas where the interest rates are higher than LPR-30BP, and for all existing housing loans in other regions with interest rates higher than LPR-30BP, they will be uniformly adjusted to LPR-30BP. Second home mortgages in Beijing, Shanghai, Shenzhen, and other areas with interest rates higher than the corresponding policy floor will be uniformly adjusted to the local policy floor.

Which situations are not included in the bulk adjustment on October 25th? China Construction Bank Corporation staff told Caixin journalists that personal commercial property (including mixed-use properties) loans, individual housing provident fund loans; loans with markup rates not exceeding -30BP above LPR; loans still priced using benchmark rates on October 25, 2024, or with fixed interest rates. In addition, loans can be included in this bulk adjustment, but for customers who disagree with the adjustment, China Construction Bank Corporation stated that they can contact the loan processing institution by October 23, 2024 (inclusive) to submit a written request to decline the adjustment.

Adjustments to existing fixed interest rate and benchmark rate loans must first apply to convert to floating interest rates.

It should be noted that existing housing loans that are part of the bulk adjustment and do not require an application must be priced using a floating rate, specifically individual housing loans priced with a floating interest rate (including first homes, second homes, and others), customers do not need to apply, and the bank will uniformly adjust the rates. However, loans with fixed interest rates and benchmark rates must first be converted to floating rates before adjustments are made.

Industrial and Commercial Bank of China mentioned that for existing fixed interest rate and benchmark rate loans, customers need to apply online or in person to the bank to adjust the pricing method, convert to LPR floating rate pricing, and then proceed with the rate adjustment according to the rules. Second home mortgages in Beijing, Shanghai, Shenzhen, and other areas that meet the conditions for conversion from second homes to first homes can be initiated online or in person with the bank to apply for the conversion to first-home mortgages, and then proceed with the rate adjustment according to the rules.

Regarding rate adjustments for converting from second homes to first homes, Agricultural Bank of China mentioned that in areas other than Beijing, Shanghai, Shenzhen, which have a lower limit for new loan interest rate markups, rate adjustments for existing housing loans do not differentiate between first homes, second homes, and others, and therefore do not need to be converted to first-home mortgages. For customers in Beijing, Shanghai, Shenzhen, and other areas who already meet the criteria for converting from second homes to first homes, they can apply through the Agricultural Bank's mobile banking app or loan processing institution.

Caixin journalists found that specific application deadlines vary among different banks. Industrial and Commercial Bank of China stated that customers with existing fixed or benchmark interest rate pricing or those looking to convert from second homes to first homes can apply via mobile banking or loan service centers from the announcement date until October 24th (inclusive). Upon approval, the bank will conduct a centralized bulk adjustment of loan rates on October 25th. Starting from October 25, 2024 (inclusive), customers can continue to initiate requests for pricing method conversion and applications to convert from second homes to first homes via mobile banking or loan service centers.

The Agricultural Bank of China stated that mortgage customers who need to convert interest rate pricing can submit a conversion application before October 22, 2024 (excluding this date). Those who meet the criteria for this interest rate adjustment policy will be included in the batch adjustment range on October 25, 2024; those who submit conversion applications thereafter will promptly handle the conversion procedures after October 25, 2024.

The Bank of China stated that applications completed by October 24, 2024 (including this date) for conversion will be collectively adjusted on October 25, 2024; those completed after October 25, 2024 will undergo a centralized adjustment on the day after the conversion is completed, and the new interest rate level will be implemented on the same day after the interest rate adjustment.

China Construction Bank Corporation mentioned that loans using benchmark interest rates and fixed-rate loans that can be included in this batch adjustment require customers to actively apply to the bank for the 'fixed to floating' business before October 23, 2024 (including this date). After transitioning to floating rate loans, the bank will proceed with this batch adjustment according to the rules.

Industry insiders: it will effectively reduce the cost of existing mortgage rates and boost consumer confidence.

Yan Yuejin, Deputy Director of the Shanghai E-House Real Estate Research Institute, stated that lowering existing mortgage rates is more effective than reducing mortgage rates in the new housing sector, as it involves a broader scope. Overall, this policy benefits the people and is an important measure to reduce the cost of existing mortgage rates and boost consumer confidence. "The reduction in existing mortgage rates this time truly reduces the monthly payment burden for each household that has already purchased a house. Coupled with the recent LPR cuts in the past few years and last year's existing mortgage rates reduction, it has indeed significantly reduced the monthly payment burden and pressure." Yan Yuejin added.

Regarding specific cost savings, the Industrial and Commercial Bank of China previously gave an example in a Q&A session, mentioning that in certain cases, interest savings could reach up to 0.14 million yuan.

Dai Zhifeng, an analyst at Zhongtai, also mentioned that for individuals, adjusting existing mortgage rates helps reduce interest expenses and boost consumption. For banks, there may be short-term drag on interest margins and performance, but in the long run, it helps stabilize the scale and reduce risks.

On September 24, at the State Council Information Office press conference, People's Bank of China Governor Pan Gongsheng pointed out that banks lowering existing mortgage rates will further reduce borrowers' mortgage interest payments. Preliminary estimates suggest that it will benefit 50 million households, 0.15 billion people, reducing total household interest payments by approximately 150 billion yuan annually. This will help promote expanded consumption and investment, reduce early repayment behaviors, compress the space for illegal replacement of existing mortgage rates, protect the legitimate rights and interests of financial consumers, and maintain the stable and healthy development of the real estate market.

Compared with the policy of lowering existing home loan interest rates in September 2023, this policy has been strengthened in terms of its scope of application and the extent of reduction. Specifically, the scope of application does not distinguish between first and second homes for existing homes, thus applying to the entire existing home loan market; the average reduction is 50 basis points, exceeding the adjustment of the point addition range previously targeted under the differentiated city policies. Regarding this batch adjustment of existing home loan interest rates, Wen Bin, Chief Economist of China Minsheng Bank, previously pointed out that it is expected to further reduce the asset-liability income gap for residents, alleviate the prepayment trend in loans, exchange price reductions for stability in quantity, help stabilize the size of bank assets, and improve consumer vitality at the resident end.