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The landscape of housing loans in today's economy is undergoing significant shifts, predominantly characterized by the discontent surrounding the interest rates on existing mortgage loans compared to newly issued ones. With the rates for new housing loans consistently declining, a growing disparity presents itself against the backdrop of stagnant rates for existing home loans. This situation has led to a rising trend of borrowers opting to pay off their mortgages early, especially among those who purchased homes at elevated prices several years ago. For these homeowners, the potential savings from early repayment often surpass the returns on bank investments during the same period.

The dialogue regarding the reduction of interest rates for existing housing loans had commenced as early as August of the previous year, but it has been amplified over the past twelve months as the rates for new home loans have continued their downward trend. The market is increasingly vocal about the necessity for equivalent adjustments to the interest rates of existing loans, aiming to minimize the growing gap in interest rates between old and new loans.

But how realistic is the prospect of lowering the interest rates on existing housing loans this time around? To explore this question, it is beneficial to examine previous adjustments. In the last round of rate modifications, borrowers could apply to refinance their loans based on new, more lenient criteria established for first-home buyers. The results of this refinancing initiative yielded a weighted average interest rate of 4.27%, representing an average decrease of 0.73%. This adjustment resulted in an estimated annual reduction of about 170 billion yuan in interest payments for borrowers.

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However, the current situation remains precarious. Despite the previously implemented rate changes, a significant interest rate gap—estimated at 0.87%—still exists between existing home loans and the rates for newly issued ones as of July this year. This discrepancy provides ample justification for further adjustments to the rates of existing loans, reflecting the strong sentiments among market participants advocating for such a change.

The high interest rates on existing housing loans have resulted in an increasing number of homeowners choosing to repay their mortgages early. Should a substantial reduction in these rates materialize, it would significantly reduce the risk of premature repayment. Nevertheless, the financial reality for domestic commercial banks must be factored into this equation. With current net interest margins sitting at around 1.54%, many banks find themselves below the critical threshold of 1.8%, which limits their ability to further lower interest rates on existing loans.

However, from the banks' perspective, lowering the rates on existing housing loans would alleviate the pressure from homeowners seeking to pay off their mortgages early and could gradually enhance the quality of banking assets. The sentiment advocating for such a rate cut is growing stronger, suggesting that the timing for these adjustments is becoming increasingly ripe.

So, what implications would a reduction in the interest rates on existing housing loans hold for the real estate market?

The most immediate impact would likely be an uplift in market confidence. While reducing loan repayments might seem like just a minor adjustment in monthly expenses, typical savings of several hundred yuan monthly can accumulate into substantial amounts over two or three decades. This potential saving can stimulate the purchasing power of homeowners significantly. As consumer confidence rises, so too does the willingness to invest—both crucial factors for revitalizing real estate and stock markets alike.

Confidence is, and always has been, a key driver impacting the trajectories of both real estate and equity markets. When market sentiment improves substantially, price levels have a tendency to rise correspondingly. Presently, the real estate sector is navigating an adjustment phase, along closely with the Kuznets economic cycle, characterized by fluctuations that can span anywhere from 15 to 25 years.

Since the domestic housing market began its correction from unprecedented highs, three years have elapsed. According to the principles of the Kuznets cycle, this period of adjustment may not be swiftly resolved, yet the restoration of confidence remains crucial. If market confidence can be rekindled, it will have a direct correlation with the phenomenon of price stabilization within the housing market.

Conclusively, lowering the rates on existing housing loans is not merely about easing the repayment burdens of borrowers; it has broader implications for consumer sentiment and investment confidence. If each household can save thousands of yuan annually from mortgage payments, millions of families collectively stand to reduce substantial living costs. This influx of funds into various markets can invigorate economic activity and enhance market conditions considerably.