The mortgage has not decreased for 10 consecutive months!

Ask AI · Why is the narrowing of bank interest rate spreads hindering mortgage rate reductions?

——Text and images are unrelated, for reference only

1

Let’s start with a small matter.

In 330, Hangzhou announced a new housing fund policy again.

I looked at the new policy content, nothing new, a total of 8 points, such as increasing the housing fund amount, increasing the number of times the housing fund can be used, raising the loan limit for special groups by 20%-70%, increasing the number of withdrawals, expanding the scope of withdrawal applicants, and allowing use for property management fees.

Old methods, similar to other cities.

Therefore, the stimulus of this new Hangzhou policy is not significant, especially for a few groups of people who find it hard to benefit, such as those with a total property value over 3 million yuan, people with multiple properties under their name, or those who have used the housing fund multiple times and haven’t repaid it yet. In practice, the coverage still mainly targets young people, especially first-time homebuyers.

On this point, Hangzhou is quite shrewd.

Young people are very attractive. They have first-time homebuyer quotas, can use the housing fund, and can also upgrade or exchange properties. Moreover, some young people in Hangzhou are quite wealthy.

Furthermore, this new policy mainly concerns housing fund loans, not commercial loans, so the benefit to other groups is even smaller. It’s more of a targeted continuation of previous major policies, with limited market stimulation.

Everyone should pay attention to another major event:

Mortgage interest rates have not decreased for 10 consecutive months.

Compared to the frugality of the housing fund, commercial mortgage rates are even more important, with stronger signaling significance.

And the fundamental difference between the two:

Any housing fund policy aims to encourage more borrowing.

But every reduction in commercial mortgage rates is meant to save you money.

One makes you spend more, the other helps you save more. Which do you prefer?

2

Why have mortgage rates not decreased for nearly a year?

Because there’s no room for further reduction.

Here are some data points to consider:

1. At the start of 2026, the first two months saw new resident deposits of 5.24 trillion yuan, which is large in volume and high in proportion, accounting for 60% of new deposits. People have money, but they are depositing it in banks.

2. Bank interest spreads are already very low.

In 2022, 1.8%-2.1%; in 2023, 1.4%-1.7%; in 2024, 1.3%-1.5%; in 2025, around 1.3%.

Market expectations differ: previously, people bought homes with loans, now even with money, they prefer to deposit in banks. Banks are no longer making much profit, so they have to lower deposit rates. Several years ago, they canceled deposit products over 5 years, and the 3-year deposit rate dropped to about 1.5%. Coupled with declining loan interest rates—credit and mortgage rates at 2.8%—interest spreads have shrunk. Last year, many banks’ spreads fell below 1.3%.

Deposits surged → loans declined → spreads narrowed → profits decreased, creating a vicious cycle for banks.

Some friends joke that, who says banks aren’t making money? Mortgage rates are still so high—just cut the salaries of bank employees, especially executives. Lower mortgage rates and pass the savings to ordinary people, why not?

It’s not that it’s impossible, but that it’s too idealistic.

There are two issues, discussed separately.

1. Can bank employees’ salaries be cut?

I found some data, not entirely accurate, for reference: 4 million bank employees, 500k tobacco system employees, nearly 2 million employees in the three major oil companies. All these systems pay very high wages.

But who dares to move? Together, over 52.4k, plus informal workers, and their families, relatives, businesses, tobacco farmers—tens of millions, no problem. Want to try?

In the 1990s, the first to dare to let banks go bankrupt, squeeze the Hainan real estate bubble, and lay off state-owned enterprise employees—only one person, who said, “Even if it’s a minefield, I will go all in,”—that’s not just talk.

The first issue, just a joke.

2. Can mortgage rates still be lowered?

Yes, but the margin is very small.

Lowering mortgage rates requires considering the overall market, not just acting on impulse.

First, banks are the foundation of the country and cannot be moved lightly.

Second, the external environment.

U.S. interest rates are high, above 3.5%. Our LPR is at 3.5%, already with a spread. If we lower rates further and spreads increase, capital will flow out to the U.S. for higher returns, leading to capital outflows, RMB depreciation, and soaring import prices—huge pressure.

No matter the big picture or small details, caution is necessary.

3

Looking back over the past 40 years, mortgage rates have generally trended downward.

First, a chart:

[Insert chart showing historical mortgage rates]

1985–1995: Overall upward trend, much higher than now, with the lowest above 9%, and peaks over 15%.

1996–2002: A mostly continuous decline, from a high of 15% down to a stable 6%.

2004–2007: During rapid economic growth and a booming real estate market, mortgage rates rose from below 6% to nearly 8%.

2008: During the global financial crisis, rates dropped below 6% quickly to stimulate the economy.

2010–2011: Economic recovery and rising house prices led to another rate hike, peaking at 7%.

2012–2025: Overall downward trend, with last year’s mortgage rate dropping to a record low of 3.5%.

Moreover, before 2022, mortgage rates exceeded 4.85%, even rising 15%-20%. Many people’s mortgage rates then were over 5.5%, even over 6%. Now, after subtracting the LPR, the actual rate is around 3%, with the housing fund even lower, halving the pressure.

Returning to the core question: why not lower?

1. At a historic low, there’s little room left for further cuts.

2. Further rate cuts have diminishing effects; overuse leads to drug resistance, and policies become less effective. Plus, as the economy gradually recovers, large stimulus is unnecessary. A prudent policy is better for absorption.

4

Some cities have started subsidizing interest, but on a limited scale.

Compared to subsidizing interest, many tax cuts and fee reductions are more practical.

For example, if you buy a house and pay 20k yuan in deed tax, many cities waive half, saving about 10k yuan. For second-hand homes, including deed tax, VAT, and personal income tax, savings of 30k-40k yuan are not uncommon—no small amount.

At this point, compare that to rate cuts or interest subsidies: for a 1 million yuan mortgage over 30 years, even with subsidies or rate cuts, monthly savings are only a few hundred yuan, totaling just over 1,000 yuan a year—one-time benefits.

Therefore:

1. Mortgage rates will not decrease in the short term; even if they do, the margin will be small.

First, their effectiveness is diminishing; second, they consider bank pressures.

If rates do fall in the future, the 5-year LPR could drop to 3.3%-3.4%, first-time home rates to 2.8%-2.9%, combined with a 2.5% subsidy, approaching the housing fund rate. The housing fund will also lower rates, but the margin will be even smaller.

2. It’s advisable to make appropriate early repayments.

For example, a 1 million yuan, 30-year loan at 3%, with a 200k yuan early repayment, leaving 800k yuan, monthly payment drops to 3,372 yuan.

This saves about 844 yuan per month, over 10k yuan a year, mainly in interest savings.

This approach benefits your asset-liability management.

3. This year’s spring market looks promising.

In Shanghai, second-hand home transactions in March are expected to reach 30,000 units, already very high.

Friends in Beijing say that a school district house they wanted, 20 years old, originally priced around 3.7 million yuan, can now be negotiated up to 3.9 million, sometimes even top-floor units, with sellers getting more assertive.

Since the second half of 2023, over three years, both the economy and the property market have been gradually recovering. That’s good news, indicating our assets are relatively safer, and expectations are clearer. But it also means policies will be limited and less forceful.

Source: Mizhai (ID: MizhaiPlus)