Original title: LPR interest rate asymmetric decline: it is necessary to meet the immediate needs of mortgage loans and avoid overheating of real estate
On the one hand, the decline of LPR reflects that the financing needs that meet the requirements proposed by the central government should also be met, and support the purchase of houses for rigid needs and improved house purchases; on the other hand, the reduction of LPR will also stimulate real estate sales and increase sales receipts. financial support.
At 9:15 a.m. on January 20, the central bank released the latest loan market quoted rate (LPR) on time. The 1-year LPR was 3.7%, down 10 BP, and the 5-year LPR was 4.6%, down 5 BP. .
The LPR was lowered, and many monthly donors said that they “saved another cup of milk tea money”. The account manager of a bank in Shanghai informed the customer: “The interest rate for the first set of housing loans in Shanghai is 4.95%, and the interest rate for the second set of mortgage loans is 5.65%.”
Three days ago (January 17), the central bank lowered the 700 billion yuan 1-year medium-term lending facility (MLF) and 100 billion yuan 7-day reverse repurchase rates. The winning rates were 2.85% and 2.10%, both down 10BP. . Both the MLF operating rate and the OMO rate are policy rates. This is the first time the central bank has cut policy rates across the board since April 2020, and the third rate cut since the outbreak. Since then, the LPR interest rate drop is imminent.
Reduce LPR by 5BP for more than 5 years: meet rigid and improved housing needs
The decline in LPR reduces the capital cost of commercial banks, creating conditions for commercial banks to lower their lending rates to the real economy.
Sheng Songcheng, a professor at China Europe International Business School and former director of the Investigation and Statistics Department of the People’s Bank of China, told reporters that in general, when LPR decreases, the loan interest rate of commercial banks will also decrease accordingly. This is because LPR is the basis of loan interest rate. The loan interest rate is generally formed by adding points on the basis of LPR. Companies with poor credit will add more points.
Previously, the reduction of OMO and MLF interest rates was only the guidance of the central bank’s policy interest rate, while medium-term lending and reverse repurchase were not the main sources of funds for commercial banks. The main source of funds for commercial banks is deposits. Although the benchmark deposit interest rate is determined by the bank itself and has a certain room for floating, the current deposit interest rate has not changed, but only the loan interest rate has dropped unilaterally, which has prompted the bank to give benefits to the real economy.
Sheng Songcheng said that the downward pressure on the economy in the first quarter was still relatively large. In this context, the country needs to start with stimulating domestic demand, support consumption expansion by lowering interest rates, and promote investment.
He believes that loans to the real economy, especially loans to small and medium-sized enterprises, are mainly within one year, so the large drop in the one-year LPR reflects the support for enterprises, especially small and medium-sized enterprises.
Why did the 1-year LPR drop by 10 BPs to 3.7%, while the 5-year LPR fell by 5 BPs to 4.6%, instead of the 10BP previously expected by the market?
Sheng Songcheng believes that the 5 BP decline in LPR over 5 years is mainly due to the housing loan factor, because after the LPR declines, the mortgage loan interest rate will also decline. On the one hand, the decline of LPR reflects that the financing needs that meet the requirements proposed by the central government should also be met, and support the purchase of houses for rigid needs and improved house purchases; on the other hand, the reduction of LPR will also stimulate real estate sales and increase sales receipts. financial support.
The reduction of only 5 BPs is mainly due to the country’s long-term policy positioning of “housing, not speculating,” “stabilizing land prices, housing prices, and stabilizing expectations” to avoid overheating of the real estate market and prevent risks.
Sheng Songcheng pointed out that China should seize the limited time window in the next few months, continue to implement marginal easing of monetary policy to promote economic growth, and at the same time prevent the massive inflow of funds into the real estate industry due to monetary easing. The reason why the recent credit policy for the real estate industry has been relaxed at the margin is not only to prevent real estate risks, but also to ensure the stable and healthy development of the real estate industry.
Sheng Songcheng: Seize the window period for the implementation of loose macro-control policies in the first quarter
Since the second half of last year, the downward pressure on my country’s economy has gradually emerged. On January 17, data released by the National Bureau of Statistics showed that the economy will grow steadily throughout 2021, with a GDP growth rate of 8.1%, but the year-on-year GDP growth rate continues to decline in each quarter, with 18.3% and 7.9% in the four quarters respectively. , 4.9% and 4.0%.
The Central Economic Work Conference held from December 8 to 10, 2021 pointed out that my country’s economic development is facing the triple pressure of demand contraction, supply shock, and weakening expectations. In terms of consumption, from January to November 2021, the total retail sales of consumer goods in my country was 39.9554 trillion yuan, a year-on-year increase of 13.7%, and an average increase of only 3.5% in the two years. The epidemic has had a negative impact on residents’ income. From the perspective of investment, from January to November, the cumulative year-on-year growth rate of my country’s fixed asset investment was 5.2%, down 0.9 percentage points from January to October, and continued to be in a downward trend. The contribution of exports to economic growth exceeded expectations and even exceeded investment. In the first three quarters, net exports contributed 19.5% of economic growth, while investment was only 15.6%.
On January 18, Liu Guoqiang, deputy governor of the People’s Bank of China, said at a press conference of the State Council Information Office that the prudent monetary policy in 2021 will be flexible, precise, reasonable and appropriate, and will begin to make forward-looking efforts in the second half of the year. After a few months “downward pressure on the economy” will become “yesterday’s story”.
Sheng Songcheng proposed in July 2021 that the second half of the year is a window period for China’s monetary policy to stabilize and loosen, and to cut interest rates reasonably and appropriately.
He explained: “The loose macro-control policy implemented in China has already seized the best window period. This window period has two meanings. One aspect is the domestic policy orientation, that is, the ‘sufficient sufficiency’ proposed by Vice President Liu Guoqiang on the 18th. On the other hand, the Fed is expected to raise interest rates: the U.S. economy now has two characteristics, one is extremely high prices; the other is that taper ends in March, and the balance sheet may shrink in the future , forced to raise interest rates.”
Sheng Songcheng believes that the United States is facing the pressure of economic development at home and the pressure of the gap between the rich and the poor, and also faces fierce international competition internationally, and will not take the initiative to raise interest rates unless it has to. However, the Fed was forced to raise interest rates slightly as prices continued to rise. In addition, Sheng Songcheng pointed out that this round of price increases in the United States was not caused by increased demand, but by the supply chain instability caused by the epidemic and the lack of raw materials and other supply-side factors. In fact, raising interest rates has little effect on the inflation caused by the supply side, because raising interest rates may lead to an increase in investment costs and a decrease in supply, so the Fed’s previous statements have also been inconsistent, indicating that they are also weighing.
But in any case, the Fed’s interest rate hike expectations are certain. If it does not intervene, it may lead to the continuous narrowing of the interest rate gap between China and the United States, the outflow of funds, and the pressure on the RMB exchange rate, which will inevitably affect China’s loose monetary policy. This is also the interest rate cut this time. one of the backgrounds. The latest data shows that the yield of the 10-year US Treasury bond has climbed from a low of 1.35% on December 3, 2021 to 1.83% on January 19; while the yield of China’s 10-year Treasury bond has been falling all the way, from October 2021. A high of 3.05% on the 19th retreated to 2.78% at the latest reading on January 18, 2022.
“The window period is not long, probably the first quarter of this year, so the recent intensive interest rate cuts can be said to be very timely.”
He believes that in the future, the Fed’s withdrawal from the stimulus policy will narrow the interest rate gap between China and the United States, the capital flow will reverse, and the RMB exchange rate will face depreciation pressure. The current moderate rate cut in China can leave room for future rate hikes to cope with possible future depreciation of the RMB and rising domestic inflation.
On January 17, the National Bureau of Statistics announced the economic data for December and the whole year of 2021. According to preliminary calculations, the gross domestic product (GDP) in 2021 will be 114,367 billion yuan, an increase of 8.1% over the previous year at constant prices. An average increase of 5.1%.
Sheng Songcheng predicts that in 2022, China’s economy will show a development trend of “bottoming out in the first quarter, stabilizing in the second quarter, and picking up in the second half”.
(Author: Wu Shuang Editor: Ma Chunyuan)