RRR Cut Won't Save Real Estate, Neither Will Extending Mortgages to Age 80

The most important information from this article on the RRR cut and real estate is the first two words of the headline, describing the across the board RRR cut as "rarely seen." The article is about real estate more than the RRR cut, but the big story (that the markets got wrong on Friday) is that China's financial system is under rarely seen stress, aka what happens every time global central bank stimulus runs out.

Also, this year saw at least one bank in Hangzhou offer mortgages to borrowers at 80 years of age. Aside from what that says about housing affordability, the public reaction reflects negative mood, with most denouncing it as creating "two generations of mortgage slaves." The bank describes it as a "relay" loan that is passed from parents to children. Chinese banks limit how long a mortgage can last, with the longest being to age 70. For example, borrowers over age of 40 can not obtain a 30-year mortgage, borrowers over the age of 50 cannot borrow for more than 20 years.

iFeng: 罕见“全面降准”:房价新周期来临?
On January 4, the central bank released news that the People's Bank of China decided to cut the deposit reserve ratio of financial institutions by 1 percentage point, of which 0.5 percentage points were cut on January 15 and January 25, respectively. At the same time, the Medium Term Lending Facility (MLF), which expires in the first quarter of 2019, is not renewed. The central bank said that the RRR cut will release about 1.5 trillion yuan of funds, plus the upcoming medium-term lending facilitation operation and the funds released by the inclusive financial assessment of the inclusive finance, and then consider the medium-term lending facilities due in the first quarter of this year. After the factors that are no longer being renewed, the net long-term capital is about 800 billion yuan.

On the same day, according to the Chinese government network news, Premier Li Keqiang visited the Bank of China, Industrial and Commercial Bank and the Construction Bank's Inclusive Finance Department on January 4, and held a symposium at the Banking Regulatory Commission. The Prime Minister stressed that it is necessary to increase the intensity of macroeconomic policy counter-cyclical adjustments, further adopt measures to reduce taxes and reduce fees, and use comprehensive reduction and targeted reduction tools to support private enterprises and small and micro enterprises.
Here's the relevant part with regards to the headline.
This is a rare "full reduction".

Coincidentally, the news of the loosening of mortgage interest rates in many cities has been continuous in recent times. On January 3, a report from the Hangzhou media sparked heated debates. The report said that a bank in Hangzhou stipulated that the maximum mortgage loan for a mortgage could be 80 years. Not long ago, Hangzhou caught everyone's attention and took the lead in lowering the mortgage interest rate in China. In the following months, many cities across the country such as Shanghai and Shenzhen also experienced loose interest rates on mortgage loans. Does this mean that housing prices will usher in a new cycle?

"Relay loan" is an individual phenomenon

According to media reports, some banks have implemented two generations of parents and children to repay their repayments, stipulating that mortgage loans can be loaned up to 80 years of age. Some commentators said that the implementation of "relay loan" will stimulate the willingness to purchase houses and promote "hot house speculation." If the parents are the main lenders and the children are the common lenders, then the children of some existing houses can move their parents' accounts and borrow the parents to buy the house. They can also enjoy the first suite priority, low down payment, and low The discount on mortgage interest rates is equivalent to circumventing the restriction on the limit and issuing tickets for the incremental population (migration account).

In this regard, the 21st Century Economic Reporter telephoned the staff of the Hangzhou Agricultural Bank Sub-branch (Xindeng Sub-branch, Jiangbin Sub-branch) on January 4. What is embarrassing is that they all said that they did not have this business. For the time being, they did not receive a notice from the superior that the mortgage loan was up to 80 years old. Another Hangzhou Fuyang District Branch said that the branch could handle the relay loan business. The customer manager of the branch told the reporter that the relay loan business is mainly aimed at some young people who have certain pressure to buy a house. Parents can repay the loan together as a co-payer. But there are also parents as the main borrower and children as co-payers. This kind of relay loan, "the interest rate is based on two sets, the period can be based on the age of the child." But she said that this example is particularly rare, the average parent is under 60 years old, and needs to be a quality customer to apply.

The staff of the Shangcheng Sub-branch of Hangzhou Agricultural Bank told reporters that the longest mortgage loan borrower is generally 65 years old, and the ABC can be extended to 70 years old. However, if the relay loan business is handled, it will be different. The main borrowers of the relay lending business are parents, and the co-borrowers are children. The repayment period can be calculated according to the age of the children. The mortgage loan for the relay can be up to 30 years. He also told reporters that the general conditions for handling relay loans are that the main borrowers need to have stable income, good credit and have the qualification to purchase houses, and the common lenders must have the same conditions, that is, stable income, good credit, and certain repayment ability. Banks need to provide the wages of their children and parents to ensure that they have sufficient repayment ability. “It’s more difficult to apply, and this type of business is doing very little,” he said.

Yan Yuejin, research director of the Yiju Research Center think tank, said that some banks in Hangzhou have adjusted their loan policies, which largely explains that there is room for adjustment in the recent mortgage. Although such policies are the practice of individual banks, However, there is a certain wind vane meaning, indicating that when the real estate market is under downward pressure, market transactions will also affect the content of bank mortgage loans, and the banks themselves will make policy adjustments. This has a certain effect on stimulating market transactions.

Many mortgage interest rate cuts

For Hangzhou to implement "relay loan", Zhang Dawei, chief analyst of Zhongyuan Real Estate, believes that this is the beginning of individual banks trying to "drill" policy. "The bank's this lending policy is very obvious to encourage children to use the old people's loan eligibility, enjoy the first suite treatment or still be able to lend. This policy is in fact disguised to cancel the loan restriction policy. The person directly affected by this policy Not much, but it is easy to be used by investment speculative demand. In the past, when the property market policy was loose, the bank was leading every time. If the bank policy in Hangzhou became loose, it would have a great impact on the market."

In fact, before the “relay loan”, some banks in Hangzhou have started to pay interest rates. Since October last year, some banks in Hangzhou have quietly lowered the mortgage interest rate: Hangzhou Industrial and Commercial Bank, CITIC Bank, etc. took the lead in lowering the mortgage interest rate, stipulating that the first home loan interest rate is 10% higher than the benchmark interest rate, and the second suite is up 15%. Previously, according to media reports, Hangzhou's first home loan interest rate remained at 15%-20% overall. Among them, the four major banks basically floated 15%, the shareholding system and the city commercial banks were relatively high, and some branches had risen by 30% and 40%. In addition, the bank's lending rate has also improved significantly.

Not only Hangzhou, but other major cities in the first-tier cities also showed signs of loose interest rates on mortgage loans. The interest rates of many banks in Shenzhen have also been lowered. Bank of China, Industrial and Commercial Bank of China, Bank of Beijing, Citibank's first home loan interest rate rose 10%, the interest rate was 5.39%. Earlier media reports showed that the interest rates of the first-home suites in Shenzhen's four major banks were up 15%, and only a few small banks had loose interest rates.

Some banks in Shanghai will receive a 5% discount on the first set of minimum interest rates. As of January 3, 2019, the latest monitoring data of the 360 ​​Data Research Institute showed that many banks in Shanghai lowered the interest rate of the first home loan. The first set of average interest rates fell to 5.09%, down from the 5.19% monitoring data in early December 2018. Percentage points.

The reporter of the 21st Century Business Herald telephoned the staff of the Huangpu District Sub-branch of Shanghai China Merchants Bank. He told reporters that the current first-home loan interest rate can be given a discount of 5%, that is, the benchmark interest rate (4.9%) is 5% off, or 4.655. %, this discount will not change in the short term. He said that Shanghai's first home loan interest rate is still relatively large compared to other cities. "But not everyone can apply for it. Generally only a small number of quality customers can enjoy this offer."

The staff of the China Construction Bank Pudong New Area Branch said that the first home loan interest rate is also a 5% discount, and will continue for some time. He said that Shanghai mortgage interest rates are still relatively stable, and no news has been received indicating that there will be changes. "If you have a first-hand house, some banks designated by the developer will have discounts. Other banks will also have a discount through specialized agencies," he told reporters.

According to the statistics of the 360 ​​Big Data Research Institute, the first set of minimum interest rates for five banks in Shanghai will be offered a 5% discount, except for ICBC, Agricultural Bank, Bank of China, China Construction Bank and Postal Savings Bank. In addition to the 50% interest rate, five banks including Jiangsu Bank, China CITIC Bank, China Merchants Bank, Bank of Communications, and Shanghai Rural Merchants are currently performing a 5% discount rate. The first set of interest rates averaged the first drop in 2019. According to previous media reports, there are still a number of banks in Shanghai such as Shanghai Pudong, China Everbright, Hang Seng, and Woori, which have lowered the interest rate of the first home loan to varying degrees, from the previous highest 30% increase to 20%.

Compared with other cities, Beijing is slightly “cool”. The staff of China Merchants Bank Beijing Branch said that since May 2018, the first suite interest rate of China Merchants Bank has risen by 10%, and the interest rate of the second home loan has risen by 20%. “The first home mortgage rate is 1.1 times the benchmark interest rate, which is unified by the banks in Beijing. But it depends on the intermediary agencies.”

The branch staff of China Construction Bank's Changping District also said that the first-home loan interest rate was 10% higher than the benchmark interest rate, and the second-home loan interest rate was basically 1.2 times the benchmark interest rate, which was basically unchanged from the previous months. “If the customer has good qualifications and good credit, there may be a discount on the mortgage interest rate.”

The staff of the Xicheng Sub-branch of Minsheng Bank told the reporter that before the Minsheng Bank was in a tight position, the interest rate of the first-home loan was higher than that of the average bank, which was 20% higher, but now it has been lowered to 15%. "As far as I know, this is a minority (down), and most banks are still stable at 10%."

The property market will welcome the new cycle?

The overall RRR cut and the interest rate of bank mortgages in many places have fallen. Does this mean that the property market will pick up soon in 2019, and house prices will bottom out?

In this regard, Guo Yi, chief analyst of Heshuo, believes that the central bank will carry out the RRR cut in the first year of the year, and the two RRR cuts are only 10 days apart. At the same time, it is announced that it shows the easing of the monetary credit environment and the urgent need to support the real economy. . For the capital-intensive real estate industry, the overall RRR cut, and the flow of funds is not clearly defined, and the liquidity is loose, which will bring significant benefits to the real estate industry that is eager for capital. First of all, for housing enterprises, the difficulty of obtaining bank loan support will be greatly reduced, the state of tight cash flow of housing enterprises will be improved, and financing costs are also expected to be lowered. In particular, state-owned enterprises, central enterprises, and the top 30 headed enterprises in the country will benefit from it. The looseness of housing funds will help reduce the phenomenon of land flow that has appeared frequently in the country. The land market in first- and second-tier cities will gradually heat up. Secondly, for buyers, the bank’s funds are abundant and new. With the liberalization of the credit line for one year, the threshold for mortgage loans will also be loose. After the general increase of 10%-15% of the mortgage interest rate in the country, the floating part will gradually shrink, and there may even be a return to the benchmark interest rate. The actual purchase cost of home buyers will also be reduced.

However, Guo Yi believes that this will not cause a rapid upward pull on the demand for home purchases. The reason is that the core factor that restricts the consumption of home purchases is the excessive down payment ratio, not the mortgage interest rate. Only the appropriate reduction of the down payment ratio will help to stimulate the purchase of houses. The release of demand.

Yang Hongxu, deputy dean of the Yiju Real Estate Research Institute, believes that the RRR cut will help increase the overall social financing. However, due to the targeted support and the real estate industry is not supported, there is no direct positive impact on the property market and housing prices. However, it still has indirect positive effects. The rivers are much more watery, and some of the water, either light or dark, will flow into the small river of real estate. Especially for personal loans, for banks, they are high-quality assets. After the bank’s loanable amount increases, under the pressure of heavy lending, and at the same time worry about the risk of bad debts of small and micro enterprises, then some commercial banks will inevitably Increase the lending of personal mortgage loans, lower the loan threshold, and the mortgage interest rate will stabilize slightly in 2019, which will help the buyers to release their demand, thereby alleviating the pressure of falling house prices.

"But we must realize that the small relaxation of personal housing loans can not immediately promote the rebound of housing prices. In 2019, the main trend of housing prices in major cities in the country will not change. In empirical evidence, there are already 2018 Four times the RRR cut, but most house prices have turned inflection points in September 2018, and they are still continuing to fall." Yang Hongxu believes.

JRJ: “房贷可还到80岁”引争议 网友:要考虑潜在风险
Anyone who bought a house knows that the mortgage loan is generally for 30 years. If it is near retirement or a retired elderly person, the mortgage loan period will be greatly reduced, and even the mortgage business cannot be handled.

  But now, some banks have broken this rule and want to extend mortgage slavery to the end of life.

  Home mortgage loans can be loaned up to 80 years
  On January 3, the Qianjiang Evening News issued a report saying that a bank in Hangzhou recently quietly adjusted its mortgage policy, stipulating that mortgage loans can be loaned up to 80 years old, breaking the highest age record of lenders.

...According to the Qianjiang Evening News report, all branches of the Agricultural Bank of Hangzhou have been notified to start implementing the policy. Before the ABC's regulations on mortgages, the maximum loan can be 70 years old, and the adjustment was extended by 10 years.

  According to the explanation of the Agricultural Bank, this is a “relay loan” product. As the name suggests, it is the relay of two generations of parents and children. The bank will strictly review the qualifications of the loan applicants, and also require the designated lender's children to be co-payers. The lender and the co-payer must have repayment ability. Once the lender loses the ability to repay, the child has to bear the corresponding repayment obligation. In general, very good customers can be approved. In this way, the risk of the elderly having limited income, increasing the chance of getting sick with age, and reducing the repayment ability year by year is avoided.

  According to the Qianjiang Evening News report, the maximum loan period for ABC's “relay loan” is 30 years. According to the explanation of the other party, if the loan is started at the age of 50, it is just 80 years old.

  Some bankers told Union Finance (unnews.com.cn) that relay lending has already existed in the banking industry . What is “relay loan”?

  Baidu Encyclopedia's explanation is that a personal housing relay loan refers to the ownership of the purchased house by the parents or an adult child (or the child and their spouse) or the parents and children. The parents or one party and the child are the co-borrowers. Buy housing credit products for housing .
Some believe this is a move designed to qualify more people for lending amid a housing slowdown:
Some insiders believe that compared with the interest rate adjustment of mortgage loans, this single incident affects a small number of people and does not have the meaning of a policy vane. Despite this, with the overall slowdown in the property market in Hangzhou, the volume of mortgage business declined, and the downward trend in interest rates is the general trend.

  Some bankers also said that relaxing the mortgage period is equivalent to qualifying for a house in disguise, but if the regulator is concerned about this matter, it is likely to be suspended. Whether it is a signal of loose mortgages, it is hard to say.

  There is a conjecture: banks generally have a maximum loan period of 70 years old, ICBC has relaxed to 75 years old, and then ABC has relaxed to 80 years old. Will there be any other banks to follow up, relax to 85 years old, then 90 years old, 95 years old?

No comments:

Post a Comment