Caifl社 October 14th (Reporter Guo Zishuo) Following the announcement by the six major banks on October 12 to adjust the details of existing housing loan rates, the pace of reducing existing housing loan rates has now extended to rural banks.

On October 14th, hundreds of rural banks nationwide issued announcements to adjust the interest rates on existing individual housing loans. The adjustment pace of the vast majority of rural banks is consistent with that of state-owned major banks. They will collectively adjust the interest rates on existing individual housing loans by October 25th, but no later than October 31st. Meanwhile, private banks and foreign banks with existing housing loan business also announced bulk adjustments of interest rates on existing individual housing loans in the past two days.

Since the People's Bank of China issued a notice on September 29 to improve matters related to the pricing mechanism of commercial individual housing loans, guiding the market interest rate pricing self-discipline mechanism to issue the Initiative on Bulk Adjustment of Existing Housing Loan Rates, the banks participating in the adjustment of existing housing loan rates have basically expanded to all domestic commercial banks. Regarding the future trend of mortgage rates, several experts believe that there is still room for a decrease in the LPR, which will lead to further reductions in future mortgage rates.

The bulk adjustment rules are similar to those of major banks, but the scope requirements vary.

Caifl社 reporters noticed that the rules for adjusting the interest rates on existing individual housing loans in rural banks are similar to those of major banks. Floating rate loans that can be included in this bulk adjustment, without the need for borrower application, will be collectively adjusted on October 25th with an added point range uniformly adjusted to -30 basis points on the LPR basis.

For loans based on benchmark interest rates eligible for this bulk adjustment, fixed interest rate loans, borrowers must actively apply to the bank for the "fixed-to-floating" business by October 25th (inclusive). After converting to a floating rate loan, if the interest rate level is higher than LPR-30 basis points, the bank will adjust the added point range to -30 basis points on the LPR basis. It is important to note that after the conversion of interest rates, they cannot be converted back to fixed or benchmark interest rate pricing.

Private bank Hua Xia Bank announced today the bulk adjustment of interest rates on existing individual housing loans within the scope of this announcement, where floating rate loans priced based on the LPR do not require customer application. The bank will proactively adjust loan rates in a unified manner on October 25th.

It should be noted that different banks have different scopes when implementing active batch adjustments. Regarding the adjustment details of non-performing individual housing loans, different banks have certain differences in the execution results. Bank of China has stated that non-performing individual housing loans will be collectively reduced when it comes to the issue of whether non-performing loans can apply for mortgage interest rate adjustments.

While Huarent Bank has indicated that the outstanding overdue principal and interest repayment of existing housing loans does not support the bank's active unified adjustment work and needs to be actively applied for interest rate adjustment by the mortgage users themselves. The Quanzhou Bank has reminded that overdue (including non-performing) loans repaying the outstanding overdue principal and interest of existing housing loans, and existing housing loans that have applied for deferred principal repayment need to be actively applied for interest rate adjustments by the mortgage users themselves. Bank of E Asia (China) has also stated that for overdue loans and non-performing loans, customers need to apply to the bank offline, and after approval, the bank will make individual adjustments, with the interest before the adjustment calculated at the original contract interest rate level.

The People's Bank of China previously pointed out that major commercial banks will release specific operational details no later than October 12, and should uniformly implement batch adjustments to existing housing loan interest rates (including first-time, second-time, and above) by October 31. After November 1, eligible borrowers, while negotiating the interest rate margin adjustment of mortgage loans with commercial banks, can also negotiate the adjustment of the repricing cycle.

In the long run, it is beneficial in stabilizing the scale. Several experts believe that the LPR still has room for a decrease.

Overall, this round of adjustments will have a short-term impact on banks' interest spreads, but in the long run, it will be beneficial for banks to stabilize loan sizes. According to data from the People's Bank of China, this mortgage rate reduction is expected to benefit 50 million households, 0.15 billion population, with an average annual reduction in household interest expenses of around 150 billion. The Governor of the People's Bank of China, Pan Gongsheng, stated that this will help promote expanding consumption and investment, and also facilitate reducing early repayment behaviors.

Regarding the impact of existing housing loan interest rate adjustments on the banking industry, Dai Zhifeng, Director of Zhongtai Research Institute, believes that in the short term, bank profits may be affected to some extent; in the long term, adjusting existing housing loan interest rates will help stabilize the banking industry and reduce risks. On one hand, mortgage loans as a cornerstone of bank retail assets, increased early repayment rates affect scale growth. If existing housing loan interest rates are adjusted downwards, bank mortgage loan scales will stabilize, helping to alleviate the pressure on the growth of bank retail assets, and stabilizing the future long-term personal loan income base. On the other hand, this will also reduce current residents' repayment pressure, thereby lowering the personal loan non-performing rate, which will help stabilize the quality of bank retail assets.

Many experts believe that the LPR still has room for a decrease, driving further downward adjustments in future mortgage rates. Dai Zhifeng believes that the central bank's interest rate reduction cycle is not over, and it is expected that there will still be room for interest rate cuts next year, which also aligns with the central bank's tone of continuously reducing the cost of social financing. With the continuous decline of future LPR, mortgage rates may continue to decrease.

Dong Ximiao, Chief Researcher of Zhonglian, told Caijing reporters: "It is expected that the two LPR varieties on October 21 will each decrease by 20 basis points. Starting from September 27, the overnight repurchase operation interest rate of the open market was adjusted from the previous 1.70% to 1.50%, a decrease of 0.2 percentage points. The overnight repurchase operation interest rate has become a major policy rate. After the adjustment of the overnight repurchase operation interest rate, it has driven the downward adjustment of the market benchmark interest rate, reducing the funding costs of commercial banks, guiding the synchronous downward adjustment of LPR."

In the view of Dong Ximiao, since the beginning of this year, the prudent monetary policy has been precise and powerful, with significant and rapid measures such as multiple reserve requirement ratio cuts and interest rate reductions, producing a cumulative effect that strongly boosts market confidence and expectations, better promoting economic recovery. After the LPR reduction, it will further drive down corporate and individual loan interest rates, help reduce financing costs for operating entities, and stimulate effective financing demand. Currently, commercial banks are speeding up the batch adjustment of existing housing loan interest rates. With a 20 basis point decrease in LPR, both existing and new housing loan rates will be further reduced, effectively reducing the burden of residential housing consumption for residents and promoting stabilization in the real estate market.