——Interest Rate Increase by PBOC Shows Advantage of “Fixed Interest Rate Loan”

    The data reported by China Everbright Bank, the initiator of fixed interest rate loans, affirms the financial innovation of fixed interest rate housing loan, a highlight in this year. It is learned recently that, the two interest rate increases by the People’s Bank of China (PBOC) sharpens the competitive edge of the fixed interest rate housing loan. To date, China Everbright Bank has signed more than 3,000 agreements of fixed interest rate housing loans, and maintained a leading market share with a balance of more than RMB1 billion from such loans.

    China Everbright Bank launched fixed interest rate housing loans in early January 2006, and timely innovated and optimized the fixed interest rate housing loans pursuant to the changes of PBOC benchmark interest rate and the market development thereafter. At present, China Everbright Bank is the first bank realizing the transition between fixed and floating interest rates in China and the only bank granting commercial housing loans at fixed interest rate, enjoying remarkable competitiveness in benchmark interest rate and discount interest rate.

    After increasing the benchmark interest rate for loans by 0.27 percentage points in April 2006, PBOC announced another interest rate increase on August 19; during which, the benchmark interest rate for loans with a term of more than 5 years is increased from 6.39% to 6.84%, an increase of 0.45 percentage point and exceeding the increase of 0.27 percentage point in the benchmark interest rate for one-year loans. Compared to the former two adjustments, the advantage of fixed interest rate housing loans is further shown since most housing loans have a term of more than 5 years.

    The interest rate increase and the competitive fixed interest rate products enable the fast development of fixed interest rate housing loans in China Everbright Bank. The more than RMB 1 billion loan balance has landmark significance to the diversified exploration in domestic housing loan interest rate products based on market rules and marks the approaching to international practice in our housing loan business.

    To maintain the leading position in fixed interest rate housing loans, China Everbright Bank will launch period/amount-combined fixed interest rate loan products in the next step. The period-combined fixed interest rate loan meets the customers’ demands on different fixed interest rates in different periods, and allows the customers to select interest rate according to the interest rate level and potential change after the expiry of fixed interest rate: the customers may select either fixed interest rate loans or floating fixed interest rate. With the period-combined product, customers may extend the term of fixed interest rate loans to 20 years. The amount-combined fixed interest rate loan meets the customers’ demands on avoiding interest rate risks and enables them to implement fixed interest rate on some principals and floating interest rate on the rest.