Shell Research Institute: With the advent of a new round of targeted interest rate cuts, how will the market change?

1. Why is there such a round of “targeted interest rate cuts”?

The market effect of previous loan interest rate cuts fell short of expectations, and the market is still declining inertia. Take second-hand housing as an example. In August and September, the volume of second-hand housing transactions in the 50 key cities of Shell continued to decline month-on-month, and housing prices maintained an overall downward trend. The phased targeted interest rate cut for real estate at this time is a measure to implement the central government's “make full use of the policy toolbox to support rigid and improving housing needs”.

2. What are the characteristics of this round of targeted interest rate cuts?

The first is phased. The interest rate cut window is only until the end of the year, which can prevent the market from falling into endless wait-and-see and accelerate consumer decision-making.

Second, it is linked to housing prices. Only cities where housing prices have been falling continuously for 3 months can cut interest rates. Currently, these cities are Anqing, Baotou, Beihai, Changde, Dali, Dalian, Guiyang, Guilin, Harbin, Jining, Kunming, Lanzhou, Luzhou, Qinhuangdao, Quanzhou, Shijiazhuang, Tianjin, Wenzhou, Wuhan, Xiangyang, Yichang, Yueyang, and Zhanjiang. The dynamic interest rate adjustment mechanism linked to the increase in housing prices is conducive to stabilizing housing prices without major ups and downs.

3. How effective will this targeted interest rate cut have on the market?

(1) Eligible cities are expected to take steps to lower mortgage interest rates to the lowest level. Only a one-step approach, rather than a toothpaste decline, will have the greatest impact on the market. According to the survey, at present, these cities are basically implementing the lower limit level of 4.1% (LPR-20). If it is lowered before the end of the year, it is conservatively estimated that it will drop to a level of about 3.6% -3.7, similar to operating loans. Mortgage loans have fallen to about the same level as operating loans, which is beneficial to reducing costs for buyers and preventing policy arbitrage.

(2) Lowering mortgage interest rates will theoretically boost consumer demand for home purchases. However, it is important to pay attention to two factors: first, most of these cities have a relatively high homeownership rate, and there is little demand for first-time home buyers; second, the difficulties of housing enterprise operations have not actually been reversed, and consumers are concerned about the risk of failure.

Relaxation of the lower interest rate limit for the first home, if it can speed up market circulation, will help housing enterprises reduce repayment, and it also depends on the effects of the policy.

4. What future policy trends will there be?

The transmission mechanism of monetary policy is limited due to low market expectations. In order to be able to play the role of cutting interest rates, it is necessary to further open up two aspects:

The first is to expand financing support to improve demand for home purchases. Not only for first-time home buyers, it is also necessary to reduce loan interest rates for “sell one buy one” and “sell old buy new” loans. This is a necessary measure in line with actual housing consumption in second- and third-tier cities. If targeted interest rate cuts are not effective, it is not ruled out that interest rates on two-home loans will be further relaxed in the future.

The second is to reduce the financing costs of housing enterprises and improve the financing capacity of housing enterprises. Despite the decline in average loan costs, the actual loan costs for real estate companies, especially private housing enterprises, are still too high, and banks and bond markets are cautious about lending to private housing enterprises. It is expected that the government will further increase the coverage of financing guarantees, guide financial institutions to reduce loan costs for high-quality private housing enterprises, help housing enterprises repair credit in the bond market, optimize pre-sale fund supervision methods, repair the capital chain cycle, and improve consumer market expectations.

103

197K Views