Recently, a number of banks, including state-owned large commercial banks, joint-stock banks, city commercial banks, rural commercial banks, and foreign banks, have successively issued announcements regarding the batch adjustment of existing personal housing loan interest rates. These announcements clarify hot topics such as the scope of adjustment, rules, methods, application and adjustment times, and application channels.

Looking at the adjustment rules, the banks are largely consistent, with the exception of loans in areas like Beijing, Shanghai, Shenzhen, and other regions for second homes, other eligible mortgage interest rates will be adjusted to the Loan Prime Rate (LPR) minus 30 basis points (BP).

From the adjustment methods of the aforementioned banks, they are divided into automatic bank adjustment and customer-initiated application adjustment. For the automatic bank adjustment method, eligible existing personal housing loans will be centrally batch-adjusted by domestic banks on October 25, 2024. Foreign banks have different timelines; for example, HSBC and Bank of East Asia will conduct centralized batch adjustments on October 28 and October 30, respectively.

For the customer-initiated application adjustment method, customers who are currently on a fixed interest rate or benchmark interest rate pricing for existing mortgages need to proactively apply to the bank for a "fixed-to-floating" service. After converting to a floating interest rate loan, the bank will batch-adjust according to relevant rules. For instance, China Construction Bank illustrates that an existing fixed interest rate mortgage at 4%, if the LPR value at the time of conversion is 3.85%, will be converted to a floating interest rate loan at LPR plus 15BP (4% = LPR + 15BP).

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It is important to note that this batch adjustment of existing mortgage interest rates only adjusts the added margin and does not adjust other loan elements such as the LPR value or the repricing date. Bank of Communications mentioned in a Q&A that different customers have different loan repricing dates (it could be January 1st of the following year or the loan disbursement date), and the loan interest rate may not have been repriced during this batch adjustment. The LPR value used for loans with a term of more than five years could be 4.2%, 3.95%, or 3.85%, which may result in differences after the batch adjustment of existing mortgage interest rates. On the loan repricing date, after the loan is repriced, the loan interest rates that participated in this batch adjustment will be adjusted to the same level.

That is to say, if a borrower's first home mortgage interest rate LPR value is 4.2% with an added margin of -10BP, the current loan interest rate is 4.1% (=4.2% - 0.1%). If the borrower's loan falls within the scope of this adjustment, the batch-adjusted loan interest rate will be LPR minus 30BP, which is 3.9% (=4.2% - 0.3%). If the borrower's loan repricing date is January 1st each year and the LPR for terms over five years is 3.85% at that time, after taking the latest LPR value on January 1st, 2025, the borrower's mortgage interest rate will be adjusted to 3.55% (=3.85% - 0.3%).

The reporter has noticed that some banks have already launched the existing mortgage interest rate adjustment feature on their mobile banking apps, allowing borrowers to check their adjusted personal mortgage interest rates.

A homebuyer in Beijing, Mr. Liu, told the reporter: "I bought a house in 2023, and the current mortgage interest rate is 4.75%. After this adjustment of existing mortgage interest rates, it can be reduced to 3.9%. Although there is still a bit of a gap with the new housing interest rate, I am very satisfied. After the repricing, the interest rate should be able to drop to 3.5%."

Yan Yuejin, Deputy Dean of the Shanghai Yiju Real Estate Research Institute, said to the reporter that this batch adjustment of existing mortgage interest rates helps to stabilize existing mortgages and increase the demand for new home purchase mortgage loans, making the cost-effectiveness of early repayments continue to decrease. For banks, it helps to prevent risks and expand business, truly promoting the healthy development of mortgage business.