The central bank has once again cut interest rates, and the move is not insignificant. The one-year term remains unchanged, while the LPR rate for terms over five years has been directly reduced by 15 basis points, dropping to 4.45%. The intention is clear, with the target directly aimed at housing loans. Coupled with the recent policy requiring a 20 basis point reduction for first-time homebuyers, the interest rate for first-time homebuyers could now reach 4.25%. Compared to the mortgage interest rates of 5%-6% in previous years, it is indeed much lower.

In just a short period of a month, with several significant adjustments made in succession, it is evident how eager the authorities are to rescue the real estate market. However, after these policies are implemented, some people are getting restless, namely those who bought houses in the past few years and are currently struggling to repay their mortgages. Seeing that their loans, if paid off, will be hundreds of thousands more than those who buy houses in the future, it's understandable why they are anxious.

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So, can the interest rates on existing housing loans be reduced according to the current policies? Below, I will analyze this for everyone in detail.

According to the current adjustment model of housing loan LPR rates, there are generally two types: fixed and floating. Friends who chose the fixed model before need not worry, as it will not matter whether the interest rates rise or fall in the future until the loan is repaid.

The second type, the floating model, has many nuances and is the focus of our discussion today.

Regarding the LPR, as we have discussed in previous programs, there are three key factors: the pricing benchmark, the addition or subtraction of points, and the adjustment cycle. The pricing benchmark is easy to understand; it is the interest rate value that is adjusted and changed on the 20th of each month. The latest pricing benchmark for terms over five years is 4.45%.

The second factor, the addition or subtraction of points, is when we apply for a mortgage, the bank will add or subtract a certain value based on the pricing benchmark, and this value, once determined, cannot be changed. For example, if your loan requires an addition of 50 basis points, then the final loan execution interest rate would be 4.45% + 0.5% = 4.95%.So, for a loan, the pricing benchmark and the addition or subtraction of points are very important, and equally important, yet most easily overlooked, is the third factor: "adjustment period."

This is closely related to what we are discussing today. Simply put, the adjustment period is the key factor that determines whether your loan will change after the central bank adjusts interest rates.

Generally, the adjustment period is set on a monthly basis. For example, if your loan adjustment period is one month, then after the interest rate cut on the 20th of this month, your loan will be adjusted on the 20th of the next month. It sounds good, so is our existing loan about to decrease soon?

Don't be too excited, as reality is often harsh. For medium and long-term loans over five years, the adjustment period is usually 12 months. This means that after this interest rate cut, you can only enjoy the lower interest rate next year at the earliest, which implies that even if the current interest rate is lowered, it has no relation to our existing loans within a year.

There is also the issue that the recently published first-home loan rate should be reduced by at least 20 basis points (BP). According to the latest loan interest rates, it can reach 4.25%. Many friends with loans are anxious and hope to lower the interest rates of their existing loans as well. But reality is still harsh. According to existing policies, once the interest rate for existing loans is determined, it cannot be adjusted again, except for adjusting together with the LPR (Loan Prime Rate). Even if it could be adjusted, I think banks would not willingly adjust it at the expense of their own interests.

From the above analysis, it is not difficult to see that all policy adjustments are aimed at friends who are applying for new loans. For those who have already taken out loans and are paying off their mortgages every month, the current policies indeed have not changed much. It is impossible to significantly reduce interest rates, and even a slight reduction will have to wait at least a year to see any changes. Everyone should be patient and try to accept the situation since we cannot change it.

So, how much was your loan when you bought your house?

You can share it in the comments section, and let's compare to see if your loan interest rate is higher or lower than others'?That concludes the content of today's program. If you have any other topics in finance and wealth management that you would like to learn about, please feel free to leave me a message.