Finance Association, May 24 (Reporter Cao Yunyi) Following three consecutive releases of real estate finance policies, mortgage interest rates and down payment ratios have been lowered in many places this week. Some regions have also ushered in a new “wave of house viewing,” but the speed of implementation in various cities has experienced a “stratification” phenomenon.

Since the “first shot” was launched in Wuhan, news of downpayment ratios and mortgage cuts has come from hot cities such as Hefei, Changsha, Xi'an, and Jinan, but there has been no movement in the north, Guangshen, and some new first-tier cities. Within the Yangtze River Delta region, Changzhou and Hefei took the lead in lowering mortgage interest rates, but cities such as Shanghai, Hangzhou, Nanjing, and Wuxi continued to maintain their original mortgage interest rates and down payment ratios. However, at present, bank insiders in Suzhou and Hangzhou all say that adjustments will be implemented soon.

Industry insiders said that first-tier cities have higher stock mortgages, and the reduction in newly issued interest rates may involve psychological differences among stock mortgage customers, so adjustments to the lower mortgage interest rate limits in first-tier cities still need to be fully considered. Third- and fourth-tier cities and ordinary second-tier cities may prioritize policy adjustments. It is expected that the down payment ratio for most cities will drop to 15% or 20% in the future.

Ordinary second-tier and third-tier fourth-tier cities are more cautious ahead of first-tier cities

On May 17, the real estate finance policy was “issued three times in a row”, driving a rapid rise in housing volume over the weekend. How are things progressing in various regions? In terms of interest rates on personal housing provident fund loans, the provinces of Guangshang, Guangshen, Chongqing, Guangdong, Liaoning, Hubei, Hebei, Henan, Jiangsu, and Jiangxi have already lowered interest rates.

However, in terms of down payment ratios and commercial loan interest rates, there is a phenomenon of stratification in various regions. First-tier cities and strong second-tier cities have yet to relax, and second- and third-tier cities are being implemented at a rapid pace. According to statistics, down payment ratios and mortgage interest rates have been lowered in cities such as Wuhan, Hefei, Changsha, Xi'an, Jinan, Zhengzhou, Kunming, Nanchang, Xiamen, Fuzhou, Changzhou, and Hefei this week, but there has been no movement yet.

The trend of ordinary second-tier cities taking the lead is also evident in the Yangtze River Delta region. Currently, Changzhou, Hefei and other places have taken the lead in lowering mortgage interest rates. However, many bankers in Shanghai, Hangzhou, Nanjing, and Wuxi said there was no change for the time being; the down payment was still 20%, and interest rates remained unchanged.

Hefei and Wuhu in Anhui Province have adjusted the down payment ratio to 15% for the first home. Hefei has simultaneously lowered the mortgage interest rate and down payment ratio, that is, the minimum down payment ratio for the first home is 15%, the minimum for the second home is 25%, and the interest rate on mortgage loans for the first home and the second home in Hefei has dropped to 3.45%, while the mortgage interest rate in Wuhu has remained at 3.45% for the first home and 4.15% for the second home.

Meanwhile, a commercial banker in a city in Nanjing told the Financial Federation reporter: “The interest rate for the first home has just been adjusted on the 15th. Currently, the interest rate for the first home is still implemented at 3.45%. The interest rate for the second home mortgage remains unchanged. It is still LPR+30 basis points, or 4.25%. Whether it falls further in the future will have to wait for the policy notice to be implemented.” However, he suggested that buyers can start with a 15% down payment plan.

Relevant sources from banks such as Suzhou and Hangzhou also said that there are no changes yet, but the new policy may be implemented in the near future. A loan manager at a joint stock bank in Suzhou said, “The down payment ratio is still 20%, but it should be adjusted in a long time. We are currently awaiting the above notice. It's not very clear to the outside world, but it won't be long before it comes to fruition.”

“The current interest rates for the down payment and the second package in Hangzhou are 3.75% and 3.95%. The down payment ratio is still 20%, but it will be adjusted soon. The exact timing is not easy to say until further notice. But if you're not in a hurry, just wait a little longer, it's quick.” A lender from a joint stock bank in Hangzhou said.

Regarding the different pace of each tier city, Wang Xiaoyi, chief analyst at the Zhuge Data Research Center, believes that first-tier cities have higher stock mortgages, and the reduction in newly issued interest rates may involve psychological differences among existing mortgage customers, so adjustments to the lower mortgage interest rate limits in first-tier cities still need to be fully considered.

Chen Wenjing, director of market research at the China Index Research Institute, pointed out that after the introduction of the new policy, third- and fourth-tier cities and ordinary second-tier cities are expected to prioritize policy adjustments, but it is expected that the down payment ratio for most cities will drop to 15% and 20% in the future.

Yan Yuejin, director of the think tank center of the Yiju Research Institute, also pointed out that the speed of each city is different, and this is also due to optimization and improvement policies. “Not long ago, Beijing optimized and adjusted its housing purchase restriction policy. Nanjing introduced housing purchases and settlements and recently lowered interest rates on loans. Therefore, these cities also need to systematically enact policies and implement them more comprehensively. They will definitely adjust and implement them in the future.”

Buyers' enthusiasm increased after the implementation of the New Deal, and they need to pay attention to the pressure on bank interest spreads

After the implementation of the new real estate policy, it aroused the enthusiasm of buyers who were previously on the sidelines, but most people who came to understand the situation were still in need. A real estate agent in Shanghai told the Financial Federation reporter that buyers have not been very enthusiastic since this year, and there has been an increase in the number of people coming to inquire after the implementation of the new policy, but the attitude is still quite cautious.

“First-tier cities themselves are in demand. In the future, on the one hand, we look at the extent to which this financial policy package will be implemented in Shanghai; on the other hand, we are concerned about whether the original restrictive policies will continue to be targeted and relaxed. The policies are all flexible, depending on how hard you want them to be implemented. The specific implementation time may be a little later than in third- and fourth-tier cities, for example within a week or two.” Zhang Hongwei, founder of Jingjian Consulting, said.

“Currently, the need to limit leverage has declined. This is because we are currently facing weak demand for credit and weakening leverage, which has led to the deterioration of the financial accelerator effect. This is also the main culprit of credit crunch and delivery contraction. There is an urgent need to fix the leverage momentum. The first thing that bears the brunt is to reduce the down payment ratio.” Li Yujia, chief researcher at the Guangdong Housing Policy Research Center, told the Financial Federation reporter.

On the bank side, a lender in Hangzhou said that after the policy was implemented, many people came to inquire about bank mortgages, but most people were most concerned about the down payment ratio. “There are also many questions about interest rates. After all, long-term loans for large sums can save a lot by lowering them a little bit.”

However, the market is somewhat concerned about the bank's asset performance after reducing the minimum down payment requirement. According to Fitch Ratings, the impact on banks' profitability is likely to be more pronounced. Eliminating the minimum mortgage interest rate limit and lowering personal housing provident fund loan interest rates will further reduce banks' net interest spreads in 2024. Furthermore, weak demand for loans, lower quoted interest rates (LPR) in the loan market, repricing of mortgages, and the need for financial institutions to continue to support the real economy will also put further pressure on banks.

The chief economist of CITIC Securities clearly stated that in this context, there is still room for future interest rate cuts. “Regulatory requirements give full play to the role of reforming quoted interest rates in the loan market. In the future, commercial banks may continue to lower deposit interest rates due to pressure on interest spreads. In an environment of high real interest rates caused by low inflation, a reduction in LPR quotes can still be expected during the year, and the timing may be slightly later.”