Cathay Pacific Haitong: Mortgage Interest Rates Just Need to Release Structural Broad Currency Precise Drip Irrigation

The Zhitong Finance App learned that Cathay Pacific Haitong released a research report saying that on September 29, the People's Bank of China issued “Adjusting and Improving Certain Monetary Policy Tools” and “Implementing Interest Rate Discount Policies for Residential Home Purchase Loans” to increase support in key areas through “targeted interest rate cuts+incremental expansion”, and from October 1, 2026, to households using newly issued commercial personal housing loans to purchase their first home, an annualized interest rate discount of 1% based on the loan principal amount. The bank believes that this policy focuses on structural support rather than comprehensive and general interest rate cuts. It not only provides a high-quality starting point on the asset side, but also protects banks' interest spread income, and pushes commercial banks to achieve a sharp rise in the volume and quality of mortgage business.

Cathay Pacific Haitong's main views are as follows:

On September 29, the People's Bank of China issued “Adjusting and Improving Certain Monetary Policy Tools” and “Implementing Interest Rate Discount Policies for Residential Home Purchase Loans”. The main contents include:

Adjust and improve a number of structural monetary policy instruments, and increase support for key areas with “targeted interest rate cuts+incremental expansion”. The core elements of the policy include: first, lowering the mortgage supplementary loan (PSL) interest rate by 25 bps (1.75% to 1.5%) and expanding the support area to “six networks” such as water grids, new power grids, next-generation communication networks, urban underground pipelines, and logistics networks; second, increasing the reloan amount for scientific and technological innovation and technological transformation by 200 billion yuan (total amount increased from 1.2 trillion yuan to 1.4 trillion yuan), and uniformly increasing the reloan support ratio to 100%; third, increasing the reloan support ratio for small agricultural support enterprises by 50 billion yuan, of which the reloan amount for small agricultural enterprises Increased degree 300 billion yuan (the total amount of small reloans and rediscounts for agricultural support after the increase reached 4.85 trillion yuan, and the reloan amount for private enterprises reached 1.3 trillion yuan). Overall, the bank believes that this policy focuses on structural support rather than comprehensive and general interest rate cuts. It not only achieves accurate drip irrigation for physical sectors such as infrastructure, technological innovation, and small and micro private enterprises, but also effectively balances net interest spread protection for commercial banks and maintains a steady operating space for the banking system.

Implement an interest rate discount policy for residents' home purchase loans, and effectively reduce the interest burden on groups in need by strengthening fiscal and financial coordination. From October 1, 2026, households using newly issued commercial personal housing loans to purchase their first home (with a floor area of 120 square meters or less and a total price of 1.5 million yuan or less, excluding affordable housing and provident fund loans) will be given interest rate discount support of 1 percentage point per annualized based on the loan principal amount for a period of not more than 5 years. The maximum interest-rate loan size for a single household is 1 million yuan, and the capital will be shared by the central government and local finance at 90% and 10%. The policy directly reduces the monthly payment pressure on homebuyers through the form of “interest rate discounts on financial contributions and deductions from bank operations” (the cumulative burden reduction of 1 million loans over 5 years can reach nearly 50,000 yuan), opening up room for policy support on the demand side.

Previously, due to falling housing prices and changes in residents' income expectations, etc., residents were cautious in their intention to increase leverage (personal mortgage loan balance at the end of June was 36.3 trillion yuan, down 3.8% year on year and negative growth for 13 consecutive quarters), which also disrupted the risk index of bank stock mortgages (taking the above listed bank data as an example, 26q2 listed banks' bad mortgage rate increased by 13 to 0.96% from the beginning of the year). The bank believes that the current interest rate discount policy is relatively positive. On the one hand, it directly affects low-threshold, inclusive immediate demand groups to guide home purchase expectations back to stability by lowering the housing purchase threshold and immediate repayment costs, helping to stop the decline and recovery in the scale of newly issued mortgage loans, and improve the credit structure and growth momentum of bank mortgage loans; on the other hand, reducing the monthly payment burden will help ease the pressure on borrowers and push the quality of banks' mortgage assets to stabilize. From a bank's perspective, the interest rate discount policy is managed by commercial banks, and requires “automatic identification and direct deduction” during the contract signing process. On the premise of not increasing the bank's interest concession costs, customer stickiness and credit investment efficiency have been increased accordingly. Taken together, the bank believes that the relevant policies not only provide a high-quality gripper on the asset side, but also protect banks' interest spread income, and push commercial banks to achieve a sharp rise in the volume and quality of mortgage business.

Risk warning: The effect of implementing the policy falls short of expectations; real estate prices are falling at an accelerated pace.