Report guide
On May 15, 2022, the people's Bank of China and the China Banking and Insurance Regulatory Commission issued a notice on issues related to the adjustment of differentiated housing credit policies, reducing the lower limit of the first home loan interest rate, which is due to the rare overall real estate interest rate guidance of the central bank since the implementation of the urban policy. We believe that the signal significance of this policy is more important than the substantive impact, verifying the current trend of marginal easing of real estate policy to help stabilize growth. At the same time, Reducing the mortgage interest rate is also in line with other real estate relaxation policies, driving the gradual lending of housing loans, pointing to "wide credit". This policy is aimed at incremental housing loans. The core purpose is to stimulate residents' willingness to buy houses, improve marginal loan demand, and drive real estate sales to pick up, but it has little impact on stock housing loans. The pricing interest rate of the first house in each city varies greatly, and the minimum interest rate will not be adopted in practice. This policy releases space for the pricing of mortgage interest rate, which helps to drive the decline of the average mortgage interest rate in the market. However, under the background of "no speculation in housing and housing", we believe that the decline of mortgage interest rate will be gradual. We suggest that we still need to pay attention to the LPR reduction in the future, and the approximate rate of LPR quotation decreased on May 20.
View of major assets: equity assets are still optimistic about the stable growth chain in the short term, and pay attention to the travel chain opportunities after normalization in the second half of the year; In terms of fixed income, it is expected that the yield of 10-year Treasury bonds will reach a high of 3.0% in the third quarter, fluctuate widely in the range of 2.7% - 3.0%, and the yield curve will return to steepness.
1. Since the implementation of the city policy, the central bank has rarely provided guidance on the overall real estate interest rate
On May 15, the central bank and the China Banking and Insurance Regulatory Commission jointly issued a document to adjust the lower limit of housing loan interest rate. Among them, the lower limit of commercial individual housing loan interest rate for the first house is adjusted to not be lower than the market quotation interest rate of the loan for the corresponding period minus 20 basis points (previously specified as "not lower than the market quotation interest rate of the loan", with a reduction of 20bp), and the second house continues to be implemented in accordance with the existing provisions.
From the perspective of policy tone, the reduction of mortgage interest rate is in line with the tone set by the Politburo meeting in April, which "supports all localities to improve real estate policies based on local conditions and support rigid and improved housing demand", and is also in line with our early judgment on the further relaxation of real estate demand side policies.
From the perspective of policy direction, this policy adjustment is also a rare adjustment of the overall real estate loan interest rate by the central bank since the government work report in 2016 proposed "implementing policies for cities", which further verified the current trend of loose real estate policy to help stabilize growth. This policy helps to stimulate the demand for the first set of housing loans, pointing to "wide credit". In April, residents' housing loans decreased by 60.5 billion yuan, an increase of 402.2 billion yuan year-on-year, and the data fell sharply. We believe that reducing the housing loan interest rate is also in line with other real estate relaxation policies to drive the gradual release of housing loans.
From the perspective of policy content, the focus of this round of interest rate reduction is still on the first house. We expect that in the future, more first and second tier cities will "implement policies according to the city", usher in the relaxation of the second house policy, and the purchase and loan restrictions are expected to be further relaxed and effectively boost real estate sales. In addition to the further deregulation of the demand side policy, we further suggest three potential directions for the relaxation of real estate during the year: first, in terms of urban renewal, we have discussed this field in detail in the previous series of urban renewal reports, and it is expected to contribute about 7% to the annual growth rate of real estate investment; Second, in terms of cash flow improvement, we believe that the supervision of commercial housing pre-sale funds is expected to usher in a greater relaxation within a reasonable range in the future and improve the cash flow of real estate enterprises. Third, in terms of monetization of shed reform, we expect that in the second half of the year, some cities with high inventory of non core second tier and third and fourth tier commercial houses may further promote monetization resettlement of shed reform and stimulate real estate sales demand.
2. The pricing interest rate of the first house in each city varies greatly, so it is impossible to adopt the lowest interest rate in practice
By the end of March this year, the average interest rate of China's first mortgage was about 5.28%, and the average interest rate of the second mortgage was about 5.57%, both higher than the current benchmark interest rate of more than five-year LPR (4.6%). In the practice of interest rate pricing, banks generally add points on the basis of the benchmark interest rate and will not directly adopt the lowest interest rate. There are also large differences in the pricing of mortgage interest rates among cities, which are mainly affected by the local real estate market situation, mortgage interest rate policies and the relationship between supply and demand. As of March, the average interest rates of the first set of mortgages in Beijing, Shanghai, Guangzhou and Shenzhen were 5.15%, 4.96%, 5.35% and 4.91% respectively. The interest rates of popular second tier cities such as Tianjin, Xiamen, Wuhan and Hefei were also widely differentiated, with 4.9%, 4.9%, 5.66% and 5.77% respectively.
According to the national data, due to the decline of LPR quotation in January and the successive relaxation of urban policies in many places this year, the loan interest rates of the first and second homes decreased month on month in March and February, with a decrease of 11 and 10bp respectively. At present, the minimum interest rate is not adopted for mortgage interest rate pricing, but we believe that reducing the lower limit of the first mortgage interest rate by 20bp will also release space for mortgage interest rate pricing, increase pricing flexibility and help drive the average mortgage interest rate down in the market. In the context of "housing, housing and non speculation", we believe that the decline of housing loan interest rate will be gradual, which is difficult to decline sharply in the short term.
3. The stock has no impact, but mainly affects the increment
This policy is aimed at incremental housing loans. The core purpose is to stimulate residents' willingness to buy houses, improve marginal loan demand and drive real estate sales to pick up. The policy has little impact on the existing housing loans: since March 2020, financial institutions have successively carried out the conversion of the pricing benchmark of the existing floating interest rate loans, which can be converted into LPR as the pricing benchmark (the point can be negative) or fixed interest rate. At present, the conversion process has been completed. Therefore, if the pricing interest rate of the existing housing loans is formed by adding points on the LPR benchmark, its fluctuation mainly depends on the LPR level on the repricing date, It will not be affected by the adjustment of the lower limit of the first mortgage interest rate.
4. Attention should still be paid to LPR lowering
We suggest that the quotation rate of LPR will decline this month. On May 9, the central bank put forward the transmission mechanism of "market interest rate + central bank guidance → LPR → loan interest rate" in the first quarter goods administration report of 2022. This mechanism means that the market interest rate plays an important forward-looking leading and influencing role in the formation of LPR quotation. Since the beginning of April, dr007 has continued to operate at a low level, and the center has moved down significantly. On the one hand, the central bank still has a forward-looking signal of the probability of interest rate reduction. We expect that there is still the probability of interest rate reduction on the continuation day of MLF on May 16. Of course, under the background that the monetary policy of developed economies has entered the tightening range, the central bank's interest rate reduction operation is also facing a certain dilemma; On the other hand, the sharp decline of the market interest rate center will have an obvious traction on LPR under the above transmission mechanism, and the "central bank guidance" does not only mean "interest rate reduction" and "reserve requirement reduction" may also be included. The central bank's reserve requirement reduction of 0.25 percentage points in April also plays a guiding role in LPR quotation. We expect that even if the central bank does not reduce the policy interest rate this month, the LPR quotation on the 20th will have a greater probability of decline.
5. Equity assets are still optimistic about the stable growth chain in the short term, and pay attention to the travel chain opportunities after normalization in the second half of the year
In the equity market, benefiting from the further relaxation of expectations in the real estate policy, we continue to focus on the multi stable growth chain in the short term, such as finance, real estate, construction and building materials. From the second half of the year, it is expected that A-Shares will show a more obvious structured market. The biggest expected difference is the improvement of personnel mobility brought by normalized nucleic acid detection, focusing on the related consumption industry chains such as aviation, airport, tourism, hotel and catering; In addition, we suggest to focus on the stabilization and upward trend of growth stocks after the US bond yield peaked. In terms of fixed income, it is expected that the yield of 10-year Treasury bonds will reach a high of 3.0% in the third quarter, fluctuate widely in the range of 2.7% - 3.0%, and the yield curve will return to steepening.
Risk tip: Overseas central banks have started the tightening process, and the interest rate spread between China and the United States is upside down. The second quarter is an important observation period of balance of payments. Once it approaches the warning line, it may disturb China's monetary policy.
