Who benefits the most? Details of the "reduction" of existing home loans are here!

If it used to be a second home loan, but now under the "new policy" it has become a first home loan, can the interest rate be lowered?

This is a complicated question that ordinary depositors may not be able to answer.

But this is precisely what is particularly noteworthy in the current plan to reduce existing home loans.

The matter of home loans is of great importance.

How can we grasp the details?

How can we understand the advantages and disadvantages?

For ordinary home loan customers, when should they take action and whether they should apply for a rate reduction?

The answers to these many questions can be found in the "Q&A" and "operational guidelines" being released by various banks.

Indeed, the key lies in the "details"!

Exceptions to the first home qualification!

Recently, ICBC, ABC, CCB, Postal Savings Bank, and other state-owned banks have taken the lead in releasing frequently asked questions about the adjustment of existing home loan rates.

These "frequently asked questions" involve "application qualifications" and "adjustment ranges," which are very important.

Regarding application qualifications, the definition in the central bank's document is: existing first home commercial individual housing loans.

That is, first home commercial individual housing loans that financial institutions have issued or signed contracts for but have not yet been issued before August 31, 2023, or other existing commercial individual housing loans that meet the first home standards in the borrower's actual housing situation.

However, different banks have made more specific explanations for different situations:

Scenario 1: If a borrower has only one personal housing loan at XX Bank that has not been repaid, can the interest rate be adjusted?

The answer is usually yes.

Because it falls within the scope of existing first home commercial individual housing loans covered by this adjustment.

However, it should be noted that the following situations are exceptions:

1. Personal housing provident fund loans and housing provident fund loans in combination loans are not included in this adjustment.

2. Loans for purchasing commercial properties such as shops are not included in this adjustment.

3. For commercial individual housing loans in combination loans, if the current interest rate is lower than the interest rate level to which the first home loan is proposed to be adjusted, no adjustment will be made.

These loans are also considered first home loans!

Scenario 2: If a borrower has one personal housing loan at XX Bank that has not been repaid, and it was processed according to the second home loan interest rate policy before August 2023, but based on the current policy in the borrower's city, it is preliminarily determined that it can be executed according to the first home loan policy, does it meet the adjustment conditions?

The answer, generally speaking, is yes.

Because whether it is a first home loan or not depends on whether the borrower's current actual housing situation already meets the first home standards in the borrower's city where the loan is processed. If it meets the standards, it can be considered as a first home loan.

For example, if the borrower purchased this property with a loan and the family did not have any other properties at that time, due to the "recognize the property and recognize the loan" policy, the loan was processed at the interest rate for a second home loan. However, the current area has implemented the "recognize the property but not the loan" policy, so it can be executed as a first home loan this time. In addition, when purchasing a house with a loan, if it is not the only residence of the family in the local area, but other houses have been sold through transactions, and the current residence has become the only residence of the family and the local "recognize house, not recognize loan" policy has been implemented, the loan can be treated as the first home.

However, in the above situation, the borrower needs to provide corresponding proof materials.

These first home loans cannot be adjusted!

Situation 3: Can the first home loan be adjusted if there is currently a default (or non-performing loan)?

According to the detailed Q&A of ICBC and CCB:

For loans that meet the adjustment criteria but have defaults, the loan should generally not be adjusted until the defaults are cleared, and it can be adjusted after the defaults are cleared. The actual implementation needs to be determined based on specific circumstances, and you can consult the loan handling institution.

If prepayment has been made, can the interest rate be lowered?

According to the response from ABC, this needs to be distinguished in two situations:

First, for those who have completed the prepayment deduction operation, the interest rate will not be adjusted. For those who have remaining principal to be repaid and meet the conditions of the "Notice," the interest rate can be lowered.

Second, for those who have applied for prepayment but have not completed the deduction, customers can cancel the prepayment application according to their own needs. For those who meet the conditions of the "Notice," they will be included in this adjustment. Please contact the loan handling bank for specific details.

How much can the mortgage interest rate be reduced?

If the borrower's mortgage interest rate can be reduced after the adjustment, how low can it go?

Based on various responses, currently, the mortgage interest rate is determined by adding or subtracting points from the Loan Prime Rate (LPR).

According to the notice from the People's Bank of China, the level of loan interest rates after this adjustment should not be lower than the lower limit of the commercial individual housing loan interest rate policy for the first home in the city where the loan was originally issued.

Currently, the lower limit of the first home loan interest rate policy in each city is based on the official website of the provincial branches of the People's Bank of China.

Here's an example:

Assuming the borrower's current loan interest rate is 5.1% and the LPR is 4.2%, the borrower's loan interest rate is determined by LPR + 90 basis points, which is 4.2% + 0.9%.

If, according to the relevant rules, the lower limit of the interest rate for the borrower's existing first home loan after the adjustment is LPR + 10 basis points, then the borrower's interest rate may be reduced by 80 basis points (i.e., 90 basis points - 10 basis points),

That is, the borrower's loan interest rate will be adjusted from the current 5.1% to 4.3%.

As for the specific adjustment range and rules, please refer to the subsequent announcements of each bank.

What is the difference between the two methods of interest rate negotiation?

According to the notice from the central bank, there are two ways to adjust the loan interest rate after submitting an application:

1. New loan replacement;
2. Negotiation to change the contract interest rate.

What do these two methods specifically refer to? And what are the differences?

ICBC responded that new loan replacement refers to the new loan issued by the original loan bank, and the borrower uses this loan to replace the existing first home loan. Negotiating changes to the contract interest rate refers to the process where both parties involved in the credit agreement, through the signing of supplementary clauses or other means, discuss and agree upon a reduction in the agreed interest rate level of the loan contract.

ICBC (Industrial and Commercial Bank of China) stated that for borrowers, there is no significant difference in the results between these two methods, as the adjusted interest rate level must comply with the lower limit of the local mortgage interest rate policy at the time the original loan was granted.

Currently, considering the convenience for borrowers, ICBC mainly adopts the method of changing the contract interest rate. Please refer to ICBC's subsequent announcements for specific details.