Starting from October 25th, except for mortgage loans in Beijing, Shanghai, Shenzhen, and other regions that are second-home loans, other eligible mortgage interest rates will be adjusted to the Loan Prime Rate (LPR) minus 30 basis points (BP).

The long-awaited detailed rules for the adjustment of existing mortgages have been released.

On October 12th, several banks, including state-owned large banks, joint-stock banks, and city commercial banks, officially published the detailed rules for the batch adjustment of existing mortgage interest rates. On October 25th, banks will carry out batch adjustments to the interest rates of eligible existing commercial individual housing loans without the need for customer application and without any fees.

Except for mortgage loans in Beijing, Shanghai, Shenzhen, and other regions that are second-home loans, other eligible mortgage interest rates will be adjusted to the Loan Prime Rate (LPR) minus 30 basis points (BP).

Which mortgages can be adjusted? How exactly are they adjusted? What do borrowers need to do? The following is a summary of various detailed issues involved in the adjustment.

01. Which mortgages can be adjusted?

According to the details published by each bank, the interest rates of existing commercial individual housing loans that have been issued will be adjusted.

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This includes ordinary pure commercial individual housing loans and commercial individual housing loans in the combination of housing provident fund loans. Both first-home loans and second-home loans are within the scope of the batch adjustment of existing mortgage interest rates this time.At the same time, some customers who have difficulties in repaying loans are also included. For instance, the Bank of China stated in its announcement that non-performing individual housing loans will also be reduced. The Construction Bank also mentioned that, taking into full consideration the actual repayment difficulties of customers in arrears, the pressure of repayment will be alleviated, and this batch will be included in the mass adjustment.

However, for existing individual housing loans (including first, second, and more) with the execution interest rate added on the basis of the Market Quotation Rate (LPR) higher than -30BP, fixed-rate and benchmark interest rate loans must first be converted to the LPR floating method before adjustment.

It is worth mentioning that some bank customers have applied for early loan repayment. Based on the responses from various banks, there are mainly three situations: if the deduction has not been completed, customers can cancel the early repayment application, and as long as they meet the conditions for this adjustment, the interest rate can be adjusted; if part of the early repayment deduction has been completed, as long as they meet the conditions for this adjustment, the remaining principal part can have the interest rate adjusted; if the entire loan has been settled, the interest rate adjustment cannot be carried out.

02. How much will be adjusted specifically?

Based on the announcements from various banks, the qualified existing housing loan interest rates will be adjusted in batches to LPR-30BP.

Specifically, the adjustment rules of each bank are basically the same. If there is no new policy limit for the added interest rate of newly issued housing loans in the city where the mortgage is located, or if the policy limit is not higher than -30BP, those with an LPR added interest rate higher than -30BP will adjust it to -30BP; those with an LPR added interest rate not higher than -30BP will not be adjusted.

If there is a new policy limit for the added interest rate of newly issued housing loans in the city where the mortgage is located, and the policy limit is higher than -30BP, those with an LPR added interest rate higher than the policy limit will adjust it to the policy limit; those with an LPR added interest rate not higher than the policy limit will not be adjusted.

For example, a bank customer's mortgage interest rate is LPR-45BP, and during this batch adjustment, their existing housing loan will not be adjusted.

It is important to note that regions including Beijing, Shanghai, Shenzhen, and others have not yet abolished the lower limit of the housing loan interest rate, so the rules differ.

For the above regions, many banks have clarified that the first set of housing loans in Beijing, Shanghai, Shenzhen, and other regions with interest rates higher than LPR-30BP, and all existing housing loans in other regions with interest rates higher than LPR-30BP, will be uniformly adjusted to LPR-30BP.Beijing, Shanghai, Shenzhen, and other regions have uniformly adjusted the interest rates for second-mortgage loans above the corresponding policy minimum to the local corresponding policy minimum.

The China Bank also mentioned in the Q&A on the adjustment of existing mortgage loan interest rates that currently, in most regions of the country, there is no difference in the reduction of loan interest rates for the first and second houses, both will be reduced to LPR-30BP, and there is no need to apply for "second to first", the interest rate reduction will be carried out in batches.

If the customer is a second-mortgage loan in the Beijing, Shanghai, Shenzhen area and currently meets the standards for the first house, they can apply to convert the second-mortgage loan to the first-mortgage loan. After approval and meeting the conditions, it will be adjusted to the first-mortgage loan, and the subsequent interest rate reduction will be carried out according to the standards for the first-mortgage loan.

03, how to adjust fixed interest rate/benchmark interest rate customers?

In this adjustment of existing mortgages, loans with fixed interest rates and benchmark interest rates must first be converted to LPR floating methods before adjustment. For these customers, various banks have also provided operation guides.

According to the announcements of multiple banks, for existing fixed interest rate and benchmark interest rate loans, customers need to apply online or offline to the bank to adjust the interest rate pricing method, and after converting to LPR floating interest rate pricing, adjust the interest rate according to the adjustment rules.

Regarding the application time, each bank is different.

The Industrial and Commercial Bank of China announced that customers currently implementing fixed interest rate or benchmark interest rate pricing, "second to first" business, can apply through mobile banking or loan service banks from the date of the announcement to October 24 (inclusive). After review and approval, the bank will carry out centralized batch adjustment of loan interest rates on October 25, and start executing according to the new interest rate level from that date, with interest before adjustment calculated according to the original contract interest rate level.

The China Construction Bank mentioned in the announcement that customers must apply to the bank to handle the "fixed to floating" business before October 23, 2024 (inclusive). After converting to floating interest rate loans, the bank will carry out this batch adjustment according to the rules.

The Agricultural Bank of China stated that mortgage customers who need to convert interest rate pricing can submit a conversion application through the bank's mobile banking or loan handling bank before October 22, 2024 (excluding). Those who meet the policy of this interest rate adjustment will be included in the batch adjustment range on October 25, 2024; those who submit a conversion application afterwards will handle the conversion procedures in a timely manner after October 25, 2024 (excluding).It is worth noting that several banks have mentioned that after the interest rate conversion, it is no longer possible to switch back to a fixed interest rate or benchmark interest rate pricing.

04. When does the adjustment take effect?

According to the information currently released by several banks, eligible existing housing loans will be adjusted on October 25th. So, when can borrowers calculate interest based on the adjusted interest rate?

Combining the announcements from various banks, for existing housing loans that meet the criteria for this batch interest rate adjustment policy, banks will centrally batch adjust the interest rates on October 25th, starting to implement the adjusted interest rates from the adjustment date (25th), and interest before the adjustment will still be calculated based on the original interest rates. After the batch adjustment of loan interest rates, banks will inform the result of the interest rate adjustment by text message.

Several banks also mentioned that if there are objections to this batch adjustment, an objection application can be submitted to the loan service bank, and the bank will not include it in this batch adjustment; if no objection is raised, it is considered as agreement to the batch adjustment according to the announcement.

It is worth noting that according to the relevant policies and requirements for this batch adjustment of existing housing loan interest rates, only the LPR plus or minus points are adjusted in this round, and loan repricing is not carried out simultaneously. Some bank customers may be adjusted to different loan interest rates due to different loan repricing dates.

Bank of Communications pointed out in the Q&A that due to different loan repricing dates for customers (it could be January 1st of the following year, or the loan disbursement date), the loan interest rate may not have been repriced during this batch adjustment, and there are three possible values for the five-year LPR used by the loan: 4.2%, 3.95%, and 3.85%, leading to different loan interest rates after this batch adjustment. However, after the next repricing date of the loan, the loan interest rates that participated in this batch adjustment will be adjusted to the same level.