RECENTLY, A TOPIC OF CONCERN TO MANY WAS THE IMPACT OF LPR ON INDIVIDUAL MORTGAGES. LPR, THE RATE OF INTEREST ON LOAN MARKET QUOTATIONS, IS THE RATE OF INTEREST ON LOAN IN THE RENMINBI ISSUED BY THE CHINA BANKING SUPERVISION AND MANAGEMENT BOARD. LPR IS RELATIVELY MORE MARKETABLE THAN PREVIOUS LENDING RATES AND IS ONE OF THE IMPORTANT INITIATIVES FOR MARKET REFORM OF THE FINANCIAL SYSTEM. THE IMPACT OF LPR ON INDIVIDUAL MORTGAGES NEEDS TO BE ANALYSED FROM SEVERAL ANGLES。

THE IMPACT OF LPR ON INDIVIDUAL MORTGAGES

FIRST, THE DIRECT IMPACT OF LPR ON THE LEVEL OF INTEREST RATES ON LOANS IS MOST EVIDENT. FOR LOANS THAT USE LPR AS A PRICING BASIS, BANKS ALSO NEED TO CONSIDER THEIR OWN FINANCIAL AND OPERATING COSTS. HOWEVER, THE LPR IS CLOSER TO THE MARKET REAL RATE THAN THE PREVIOUS BENCHMARK RATE, WHICH MAY MEAN A MORE FAVOURABLE LOAN RATE FOR MANY RISK- AND COST-SENSITIVE HOME BUYERS. THE INTRODUCTION OF LPR, IN THE CONTEXT OF THE CURRENT OVERALL DOWNWARD TREND IN THE INTEREST RATE ON MORTGAGES, MAY CAUSE FURTHER DECLINES IN THE INTEREST RATE ON PERSONAL MORTGAGES, WHICH IS CERTAINLY GOOD NEWS FOR HOME BUYERS。

SECOND, LPR CAN ALSO HAVE AN IMPACT ON THE MANNER IN WHICH INDIVIDUAL MORTGAGES ARE REPAID. IN THE PAST, INTEREST RATES ON LOANS HAD FLUCTUATED ONLY SEVERAL TIMES, WHILE IN THE CASE OF LPRS, THEY HAD BEEN MORE FLEXIBLE. THIS ALSO MEANS THAT BORROWERS NEED TO FOCUS MORE ON THEIR ABILITY TO BORROW AND THEIR PERSONAL FINANCIAL POSITION WHEN CHOOSING THE REPAYMENT MODALITY, WHICH MAY IN PART INCREASE THE REPAYMENT PRESSURE OF THE BUYER DURING THE LOAN PERIOD, REQUIRING THE BUYER TO PLAN IN ADVANCE ITS OWN REPAYMENT CAPACITY AND MODE OF REPAYMENT。

FINALLY, LPR MAY HAVE AN IMPACT ON THE APPROVAL AND RELEASE OF HOME-PURCHASE LOANS. SINCE LPR BENCHMARK RATES ARE MORE MARKETABLE, THE CRITERIA FOR ACCESSING LOANS WILL ALSO BE MORE STRINGENT, WHICH MEANS THAT IT MAY BE MORE DIFFICULT FOR HOME BUYERS TO APPLY FOR LOANS. AT THE SAME TIME, SINCE THE LPR BASE RATE MARKET IS FORMED BY BANK QUOTATIONS AND THE LPR RATES VARY SLIGHTLY FROM ONE BANK TO ANOTHER, WHEN SELECTING A LOAN BANK, THE PURCHASER HAS TO CONSIDER THE LPR RATES OF THE BANKS AND THE INDIVIDUAL APPROVAL REQUIREMENTS。

IN GENERAL, THE IMPACT OF LPR ON INDIVIDUAL MORTGAGES IS MULTIFACETED. IN THE CURRENT SITUATION, LPR WOULD, TO A CERTAIN EXTENT, ALLOW HOME BUYERS TO OBTAIN A MORE COMPETITIVE RATE OF LOAN INTEREST, WHILE ALSO REQUIRING THEM TO FOCUS MORE ON THE PLANNING OF INDIVIDUAL REPAYMENT CAPACITY AND REPAYMENT METHODS IN ORDER TO BETTER ABSORB REPAYMENT PRESSURE。