In Fujian Province, the mortgage interest rates in several cities, including Xiamen, Fuzhou, and Putian, have been uniformly raised from 3.05% to 3.1%. The unclear lower limit on interest rates has led to a price competition among banks, and this adjustment is a correction of the excessively low rates, not an indication of policy tightening.
According to the Financial Associated Press on December 4 (Reporter Shi Sitong), following the sequential increase in mortgage interest rates in cities such as Guangzhou, Ningbo, Wuxi, and Hangzhou, many areas in Fujian have recently also joined the ranks of raising rates. Financial Associated Press reporters learned that on December 4, mortgage interest rates across multiple cities in Fujian, including Xiamen, Fuzhou, and Putian, have been uniformly increased from 3.05% to 3.1%, which is the second increase since the lowest level of 2.95% in October.
Industry experts believe that this adjustment primarily stems from the banks' need to stabilize their net interest margin and maintain long-term, sound operation; it is a correction of the excessively low rates and does not indicate a tightening of policy. The previous situation of mortgage rates being below 3% was mainly caused by irrational competition among individual banks, which could mislead consumers and impact the banks' revenue. Looking ahead, there may be a possibility of adjusting the lower limit on mortgage rates.
Mortgage interest rates in multiple areas of Fujian have been uniformly adjusted to 3.1%.
"Starting today in Xiamen, the five-year mortgage interest rate is LPR minus 50 basis points, which is 3.1%." A related staff member from Xiamen Maitian Real Estate told Financial Associated Press reporters that beginning today, the mortgage interest rate for new applications in Xiamen has been increased from 3.05% to 3.1%, with no distinction between first-time and second-time buyers, and the housing provident fund loan rate remains unchanged.
In fact, this is not Xiamen's first increase in mortgage interest rates recently. According to the staff member, in October, mortgage rates in Xiamen previously dropped to the lowest of "LPR minus 65 basis points" or 2.95%, but this level was maintained for only about half a month. After November 6, it was raised to "LPR minus 55 basis points" or 3.05%. As of today, the mortgage interest rate has been raised again to "LPR minus 50 basis points" or 3.1%.
Meanwhile, Financial Associated Press reporters also verified this latest adjustment with several banks. According to a loan manager from a branch of the Bank of China in Xiamen, currently, mortgage interest rates across the entire Fujian region may have all been adjusted to 3.1%. "The Xiamen area, or the entire Fujian area, should be the same."
Subsequently, Financial Associated Press reporters contacted commercial banks in multiple areas of Fujian for further consultation. According to incomplete information, in addition to Xiamen, several cities, including Fuzhou, Putian, Quanzhou, Ningde, and Xianyou, also uniformly raised mortgage interest rates to 3.1% on December 4.
“Just received the notice in the last two days, all of Putian is at 3.1%.” A loan manager from a branch of the agricultural bank of china in Putian stated. Meanwhile, a loan manager from a branch of the china construction bank corporation in Fuzhou also indicated that this adjustment is mandated by the People's Bank of China, and currently, all mortgage rates in Fuzhou are 3.1%.
Regarding the policy of whether the People's Bank of China stipulates that mortgage rates should not be lower than 3.1%, relevant customer service personnel from the Fujian branch of the People's Bank of China responded that their branch guided the self-discipline mechanism for market interest rate pricing in Fujian Province in May this year, removing the lower limit on the interest rate policy for commercial individual housing loans. Commercial banks reasonably determine the specific interest rate for each loan based on risk pricing principles, combined with their operational situation and customer risk status.
“Basically, it still depends on the specific circumstances of each commercial bank; we don’t have a very clear lower limit here.” She stated.
Unclear lower limit on interest rates may lead to competitive pressure among banks.
“This adjustment is primarily driven by the bank’s own needs for stable net interest margin and long-term stable operation.” Chief economist Mingming from citic sec analyzed to the reporters from Cai Lian She, stating that the few cases of mortgage rates lower than 3% are mainly due to irrational competition from a small number of banks, which misleads consumers and may impact bank income.
In his view, the uniform adjustment of mortgage rates to 3.1% in multiple cities results from banks comprehensively considering operating costs, market supply and demand, risk premiums, and other factors. This is beneficial for maintaining mortgage rates at a reasonable level, promoting sustained healthy development of the market. Moreover, this adjustment does not mean a tightening of policy but rather a correction of excessively low rates, aiming to create a healthier and more sustainable development environment for 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 are raising mortgage rates, primarily as the real estate market gradually rebounds (especially in economically developed areas such as guangdong, zhejiang, jiangsu, and fujian). With an increase in mortgage loans and a decrease in early loan repayments, the pressure to assess bank profits has increased, necessitating a timely adjustment of mortgage rates.
In his opinion, ultra-low mortgage rates are unsustainable. On one hand, considering comprehensive costs such as capital costs, mortgage risks, operation costs, and capital occupation, it is essential for most banks to maintain a certain level to break even. On the other hand, whether it is to maintain a reasonable profit level for banks or to ensure the integrity of the risk control system, determining a lower limit on interest rates is necessary to filter clients and reduce non-performing rates.
With unclear interest rate limits, the competitive pricing among banks has misled consumers into believing that mortgage rates will continue to fall, even leading them to choose the bank with the lowest rate. This has disrupted the normal process of mortgage issuance. Therefore, Li Yujia believes that, while maintaining a lower limit, differentiated loan rates should be established based on differences in banks' funding and management costs, combined with clients' creditworthiness, in order to create a normal pricing mechanism.
Looking ahead, he stated that the lower limit of mortgage rates may be adjusted due to various factors such as changes in deposit rates, policy rates, and reserve requirement ratios. However, if the real estate market continues to decline, there may be instances of price reductions to attract customers due to the pressure on banks' lending assessments. "But in any case, banks should move away from purely harmful internal competition."
