the issue of interest rates is a key point in the process of buying housing. at the time of the loan, we often hear two interest rates — lpr and mortgage. so what's the difference between these two interest rates

I. Different definitions

LPR (Loan Prime Rate), the loan market quote rate, is the new base rate for loans periodically published by the People ' s Bank of the People ' s Republic of China. It is a loan interest rate standard that must be followed, which also implies greater bank autonomy in terms of the loan rate. On the other hand, the interest rate on mortgages is the rate charged by the bank on loans made by the purchaser, and the bank sets the specific rate according to its own financial cost and profit space。

II. Aligning patterns

The adjustment of the mortgage interest rate was made after the change in the central bank interest rate, but since 8 October 2019, the rules for the adjustment of the mortgage interest rate have changed and, with LPR as the base rate, the bank can only adjust the loan rate. The lpr interest rate, on the other hand, is a mechanism based on market interest rates, which are quoted and adjusted by the central bank to financial institutions on 5 per month. This also means that LPR changes are more flexible and timely。

III. Differing benchmark interest rates

IN THE PAST, THE BENCHMARK FOR MORTGAGE RATES WAS OFTEN THE PRICING BASIS FOR LOAN RATES, BUT THIS CHANGED AFTER LPR PROMOTION. THE CURRENT INTEREST RATE ON MORTGAGES IN MAJOR BANKS, IN ADDITION TO BEING LINKED TO THE BASE RATE (LPR), IS RELATED TO PERSONAL CREDIT AND MORTGAGES. THE LPR BENCHMARK RATE IS DETERMINED BY THE CENTRAL BANK AND IS TRANSPARENT, AND CHANGES IN INTEREST RATES CAN ONLY BE INFLUENCED BY THE ECONOMIC SITUATION。

IV. Differing patterns

interest rates on mortgages are usually fixed and floating. the lpr interest rate, on the other hand, is more floating, linked to changes in the central bank ' s base rate. once the base rate of the central bank has been adjusted, the bank adjusts accordingly, rising or falling in line with the required gap。

in summary, although the lpr and mortgage rates both bear the word “interest rate” in their name, they are in fact two very different concepts. the lpr interest rate is more flexible and responsive, while the mortgage rate is only a form of charge to the purchaser, and changes are more dependent on the bank ' s own financial costs and profitability。