"Mortgage interest rates have dropped from 4.2% to 2.85%, it's so delightful!" On a social media platform, Ms. Huang from Yantai shared her updated loan contract, with the latest loan interest rate at a mere 2.85%.

Similarly, Li Yun (a pseudonym) from Changsha has also successfully reduced her existing mortgage interest rate to 3.45%. In 2022, Li Yun, who had just graduated for two years, decided to purchase her first home in Changsha, with a commercial loan annualized interest rate of 4.25%. Since then, with the adjustment of LPR (Loan Prime Rate) and the existing mortgage interest rate, Li Yun's loan interest rate has decreased, but it was still close to 4%. In July 2024, after accumulating enough housing fund quota, she submitted an application for "commercial to public" conversion and successfully reduced the loan interest rate to 3.45%.

Many people share similar experiences with Ms. Huang and Li Yun. Recently, there have been multiple posts on social media platforms claiming a significant drop in their existing mortgage interest rates. After inquiring with several homebuyers, a journalist from First Financial Daily found that this "reduction in existing mortgage interest rates" is actually due to some homebuyers applying for the "commercial to public" loan business with a subordinate mortgage method. This means that homebuyers can convert their commercial housing loans from commercial banks into personal housing provident fund loans without having to settle the original commercial loans.

Advertisement

The journalist from First Financial Daily noticed that in the past two years, some cities have successively opened or restarted the "commercial to public" loan business. The business model is also continuously being optimized and upgraded, including supporting "subordinate mortgage" direct repayment with housing funds, expanding the range of cooperative banks, and broadening the scope of participants.

Multiple places have restarted the "commercial to public" business. The reporter learned from the industry that the so-called "commercial to public" business refers to homebuyers converting their original higher-interest commercial housing loans into lower-interest provident fund loans under certain conditions. This model is not new and has been introduced in many cities before, but some cities have suspended the "commercial to public" business due to the long-term high operation of the individual loan rate of the housing fund.

Even in cities that implement the "commercial to public" policy, some only adopt the "repay first, then lend" model. Under the "repay first, then lend" model, applicants for the commercial to public loan must first apply for a provident fund loan, and after approval, they must raise funds to repay the commercial loan themselves.

A homebuyer who has handled this business told the reporter that "repay first, then lend" is more troublesome, as it requires raising a sum of money to pay off the commercial loan first. If it involves a large amount of funds, there may also be a certain "bridge" cost.

Due to the above reasons, "commercial to public" has been mentioned less in previous discussions on reducing existing mortgage interest rates.

However, in the past two years, several cities have reopened the "commercial to public" business. On August 23, the Changchun Housing Provident Fund Management Center issued a notice to start the business of converting commercial individual housing loans to a "housing fund + commercial loan" combination loan. On August 12, Xuancheng City in Anhui Province announced the resumption of the housing fund "commercial to public" loan business.According to an incomplete survey by First Financial Daily reporters, since the beginning of 2023, about 30 cities have successively launched or resumed "commercial to public" and "commercial to combination loan" services. In addition, several cities have also been working to upgrade the "commercial to public" business model by introducing the "sequential mortgage" model. For instance, by the end of June this year, the Yantai Housing Provident Fund Management Center issued a notice to carry out a direct conversion business from commercial housing loans to housing provident fund loans without the need for self-raised funds across the city. Eligible applicants, with the consent of the original commercial loan bank, can clear the original commercial loan directly with the housing provident fund loan funds by going through the "sequential mortgage" registration procedures for immovable property. During this process, there is no need to raise funds in advance to fully repay the original commercial loan. According to the reporter's incomplete statistics, in addition to Yantai, nearly ten cities including Zhengzhou, Zhangjiakou, and Horgos also support the "commercial to public" operation using the sequential mortgage method.

Ms. Huang and Li Yun are among those who applied for the "commercial to public" loan business using the sequential mortgage method, and shortly after the policy was implemented, they reduced their existing mortgage interest rates to the "3s".

There are still certain restrictive conditions for "commercial to public" conversions. The reporter found that in many cities that have opened "commercial to public" services, it is required that the "commercial to public" house has obtained the real estate certificate, and the loan replacement is limited to pure commercial loans. In addition, some local "commercial to public" policies have clear requirements for the number of houses, housing provident fund loan records, and housing area. Taking the "commercial to public" policy in Henan Province as an example, applicants need to have paid the provident fund normally for more than 6 months in a row, the loan replacement conditions are limited to pure commercial loans, and the house area cannot exceed 200 square meters.

In the "Leaders' Message Board" section of People's Daily Online, there were more than 20 messages about "commercial to public" related issues in August alone. The small scope of cooperative banks and the difficulty of using them in different places were highlighted by homebuyers. Some homebuyers believe that there are fewer "commercial to public" cooperative banks in their cities and hope to expand the scope; some homebuyers look forward to their cities joining the ranks of those that have opened "commercial to public" services; some homebuyers cannot enjoy the "commercial to public" policy due to buying a house in a different place; some places require homebuyers to raise funds to pay off the commercial loan first, and homebuyers hope that policies can be innovated to eliminate the fundraising turnover process.

In addition, when restarting the "commercial to public" policy, most places have indicated that they will implement a dynamic start-stop system based on the individual loan rate (i.e., the ratio of the balance of individual housing provident fund loans to the balance of deposits). This also means that if the individual loan rate standard line is exceeded, the "commercial to public" business in some cities may be suspended. For example, on July 30 of this year, the Nanning Housing Provident Fund Center suspended the acceptance of "commercial to public" loan business because it met the conditions for suspending the acceptance of "commercial to public" loan business.

It is understood that different cities have different early warning standards for individual loan rates, mostly with a threshold of 85% or 90%. For example, as mentioned above, Nanning stipulates that when the fund utilization rate of the management center exceeds 85% and there is a shortage of loan funds, the acceptance of "commercial to public" loan business is temporarily suspended; Changsha clearly states that when the individual loan rate is higher than 90% (inclusive), the "commercial to public" reservation and acceptance are temporarily suspended.

However, the reporter has noticed that the optimization of the "commercial to public" policy in various cities is also continuing, and there are signs of relaxation of the threshold. Taking the Wuhan housing provident fund policy as an example, previously, the Wuhan Housing Provident Fund Center did not accept the "commercial to public" business for flexible employment personnel. On August 2, the Wuhan Housing Provident Fund Management Center issued a notice stating that the policy for flexible employment personnel in Wuhan to convert individual housing commercial loans to individual housing provident fund loans shall be implemented in accordance with the policy for unit employees in Wuhan.Yan Yuejin, the deputy dean of the Shanghai Yiju Real Estate Research Institute, believes that such policies that convert commercial loans to public ones further illustrate the direction of local housing provident fund centers in implementing burden reduction and convenience for the public. These policies have a positive effect on the reduction of existing mortgage interest rates. Currently, there are many similar policies in various places, and homebuyers concerned should actively pay attention to such policies, realizing that they are closely related to mortgage interest and repayment.