In recent times in Mainland China, there has been a notable decrease in the interest rates for existing home loans as of October 25th. However, many borrowers have observed that their current repayment amounts did not immediately decrease following the reduction in interest rates. Instead, some borrowers experienced an increase in their repayments. The phrase “Although the mortgage interest rate has been lowered, the monthly payment has increased” has trended widely and sparked discussions. The responses from banks have varied on this matter.
According to a report from the “China Business Daily,” numerous users have reported that “despite the decrease in existing home loan interest rates, the recent repayment amounts have actually increased.”
Mr. Wang from Shanghai stated: “Before the adjustment of the mortgage interest rate, the monthly deduction for the mortgage was nearly 6000 yuan, but this month it deducted 10000 yuan instead.”
Similar cases have been reported by many borrowers. Mr. Li from Chongqing mentioned: “My mortgage interest rate was lowered from a fixed 4.41% to 3.38%, yet the adjusted repayment amount increased from 3197 yuan to 3276 yuan. I hope the repayment amount will decrease next month.”
Some users have also noted that after the adjustment of the mortgage interest rate, their repayment amounts have increased for two consecutive months.
On October 25th, major commercial banks in China, including state-owned large banks and joint-stock commercial banks, announced a bulk adjustment of existing home loan interest rates.
As reported by the “China Securities Journal,” Ms. Tang from Beijing stated: “I make repayments on the 3rd of each month. The mortgage interest rate was reduced to 3.9% on October 25th, but the repayment amount for November increased by more than 200 yuan.”
The report mentioned that on the 21st, inquiries were made with several banks such as Industrial and Commercial Bank of China, Agricultural Bank of China, China Construction Bank, China Merchants Bank, and Ping An Bank. It was found that some customers who chose to repay “equal principal and interest monthly” experienced this situation.
A personal loan manager from Agricultural Bank of China explained that under the equal principal and interest repayment method, when the interest rate remains unchanged, the total monthly repayment does not change, but the principal will gradually increase while the interest decreases. After an interest rate adjustment, there will be changes in the total monthly repayment.
The main reasons why some borrowers see an increase in their current monthly repayments after a reduction in the mortgage interest rate include the following:
1. Tiered interest calculations
2. The need to recalculate monthly repayment and principal and interest after the adjustment of existing home loan interest rates
3. After the interest rate reduction, calculating the current principal and interest according to the new rate, dividing the interest for the current period based on the days under the new and old rates. If the recalculated principal increases more than the interest decrease, the monthly repayment will increase after the adjustment, leading to the situation where a decrease in interest rates results in an increase in repayment amounts.
Several bank loan officers mentioned that due to the complexity of the monthly repayment calculation method and the differences in repayment structures for different borrowers, if any irregularities are detected, borrowers can inquire with the loan bank for specific details.
Regarding the situation where the monthly repayment increased despite a decrease in the mortgage interest rate, Mr. Wang, mentioned earlier, contacted the bank’s customer service, and they replied: “Multiple users have reported this situation. It may be a system problem that is currently being investigated.”
This topic has sparked a significant amount of discussion among netizens, with some resorting to satire.
“banity” shared: “My mortgage interest rate was 4.0%, which was lowered to 3.9%. After the decrease, the repayment amount increased by 80 yuan. The bank’s response was that the adjustment was due to changes in the repayment principal.”
“濮樂聖b2” jokingly remarked: “Bank: We’re sorry, the interest rate did indeed decrease, but the algorithm has changed, so the repayment amount increased.”