Financial Services Association, December 4 (Reporter Shi Sitong) Following the successive increases in mortgage interest rates in cities such as Guangzhou, Ningbo, Wuxi, and Hangzhou, many parts of Fujian have recently joined the ranks of increases. A Financial Services Association reporter learned that on December 4, mortgage interest rates in several cities in Fujian Province, including Xiamen, Fuzhou, and Putian, were uniformly raised from 3.05% to 3.1%, which has already been raised twice from the previous minimum level of 2.95% in October.

According to industry experts, this adjustment mainly starts from the banks' own demand for stable net interest spreads and long-term steady operation. It is a correction to excessively low interest rates, and does not mean policy tightening. Previously, the situation where mortgage interest rates were below 3% was mainly due to irrational competition among individual banks, which could easily mislead consumers and also impact banks' income. Looking ahead to future trends, there is a possibility that the lower mortgage interest rate limit will be adjusted.

Mortgage interest rates in many parts of Fujian were uniformly adjusted to 3.1%

“On the Xiamen side, starting today, the interest rate for five-year mortgages will be LPR reduced by 50 bps, or 3.1%.” Staff related to Maitian Real Estate in Xiamen told the Financial Federation reporter that starting today, interest rates for new mortgage applications in the Xiamen region will be raised from 3.05% to 3.1%, regardless of whether the first or second unit is set; interest rates on provident fund loans will not change.

In fact, this is not the first time that interest rates on mortgages have been raised in Xiamen recently. According to the staff member, the lowest mortgage interest rate in Xiamen dropped to “LPR-65bp” or 2.95% in October, but this level only remained at about half a month, and was raised to “LPR-55bp” or 3.05% after November 6. Until today, mortgage interest rates have been raised to “LPR-50bp,” or 3.1%.

Meanwhile, the Financial Services Association reporter also verified this latest adjustment with a number of banks. According to the loan manager of a branch of the Bank of China in Xiamen, mortgage interest rates in the entire Fujian region may have been adjusted to 3.1%. “The Xiamen region, or the entire Fujian region, should be like this.”

Afterwards, the Financial Services Association reporter also contacted commercial banks in many places in Fujian for further consultation. According to incomplete analysis, in addition to Xiamen, several other cities, including Fuzhou, Putian, Quanzhou, Ningde, and Xianyou, all uniformly raised mortgage interest rates to 3.1% on December 4.

“I just received the notice in the past two days. All of Putian is 3.1%.” The loan manager of a branch of the Agricultural Bank in Putian said. At the same time, the loan manager of a branch of China Construction Bank in Fuzhou also said that this adjustment is uniformly stipulated by the People's Bank of China. Currently, interest rates for all mortgages in Fuzhou are 3.1%.

Regarding “whether the People's Bank of China stipulates a policy of not less than 3.1% in mortgage interest rates,” the relevant customer service staff of the Fujian branch of the People's Bank of China responded that in May of this year, its branch had guided the Fujian market interest rate pricing self-regulation mechanism and abolished the lower limit of the interest rate policy for commercial personal housing loans. Commercial banks reasonably determine the specific interest rate level for each loan based on risk pricing principles, taking into account factors such as the institution's business conditions and customer risk conditions.

“Basically, it still depends on the specific situation of each commercial bank, and we don't have a very clear lower limit.” she said.

The lower interest rate limit is unclear or may lead to rolling competition within banks

“This adjustment is mainly based on the banks' own stable net interest spreads and the need for long-term steady operation.” The chief economist of CITIC Securities clearly analyzed to the Financial Federation reporter that very few cases of mortgage interest rates below 3% are mainly due to irrational competition among very few banks, which can easily mislead consumers and also impact banks' income.

In his view, the uniform increase in mortgage interest rates to 3.1% in multiple cities is the result of banks comprehensively considering factors such as operating costs, market supply and demand, and risk premiums, which is conducive to maintaining a reasonable level of mortgage interest rates and promoting the sustainable and healthy development of the market. At the same time, this adjustment does not mean a tightening of policies, but rather a correction to excessively low interest rates with the aim of bringing a healthier and more sustainable development environment to the market.

At the same time, Li Yujia, chief researcher at the Housing Policy Research Center of the Guangdong Urban and Rural Planning Institute, also pointed out that recently, more and more cities have raised mortgage interest rates, mainly due to the recent gradual recovery of the real estate market (especially in economically developed regions such as Guangdong, Zhejiang, Jiangsu, and Fujian), mortgage loans have increased and early loan repayments have decreased. At the same time, the pressure to assess bank profits has increased, and mortgage interest rates need to be raised in due course.

In his view, ultra-low mortgage interest rates are unsustainable. On the one hand, after comprehensively considering comprehensive costs such as capital costs, mortgage risks, operating costs, and capital occupation, for most banks, not falling below a certain level is a capital guarantee point. On the other hand, whether banks maintain a reasonable level of profit or the integrity of the risk control system, it is necessary to use moderate interest rates to screen customers, reduce bad rates, and determine the lower interest rate limit.

“At the same time as the lower interest rate limit is unknown, the rolling price competition within banks misleads consumers. They think that mortgage interest rates will fall, or even sit on the ground and choose whichever bank has a lower interest rate, thus disrupting the normal process of mortgage investment.” Therefore, Li Yujia believes that on the basis of maintaining the lower limit, differentiated loan interest rates should be set based on differences in bank capital costs and management costs, combined with customer credit conditions, etc., which is the normal pricing mechanism.

Looking ahead to future trends, he said that there is a possibility that the lower limit of mortgage interest rates will be adjusted due to various factors such as deposit interest rates, policy interest rates, and deposit reserve ratio adjustments. However, if the real estate market continues to decline, the act of soliciting customers at reduced prices may also occur under pressure from bank loan assessments. “But no matter what, banks need to say goodbye to simple internal, vicious competition.”