With the policy on tightening credit into real estate market, increased interest rates for loans to borrow, repair houses have caused many borrowers to worry.
Nguyen Hong Anh (living in Thu Duc district, HCM City) said after paying more than half of the bank loan to purchase a condo apartment, she still owes 300 million dong. Most recently, the bank has announced to adjust up lending rate from 11 percent/annum to 12.5 percent.annum, causing her family to face more difficulties because her and her husband’s income is just about 15 million dong per month and they have to afford their two children.
Meanwhile, Truong Minh Lan (living in District 9, HCM City) who is also having a loan at Viet Capital Bank to purchase an apartment at Khang Dien project also said she has just been informed by the bank about the interest rate increase by 0.5 percent/annum compared to the previous time.
Since the beginning of May 2018, Eximbank decided to adjust lending rates for home and land purchases by one percent/annum from the previous time, to 11 percent/annum. This new interest rates are applicable to all loans including home building, home repair and apartment purchase. Meanwhile, Techcombank’s credit division said currently, lending rates for home purchase and repair may amount to 11 percent/annum depending on each project and specific payment period.
In fact, lending rates for real estate, especially for project owners and home borrowers have recently only increased but not decreased. Of which, many banks are applying lending rates for home and land purchase at about 12-12.5 percent/annum. However, this interest rate is not yet the highest because some banks have pushed up lending rates for home repair, new construction and purchase to as much as 13 percent/annum.
Increased lending rates mean bigger financial pressure on customers. Therefore, if this trend continues, some people may fall in the state of insolvency.
Dr Bui Quang Tin, financial and banking expert said lending rates of banks have gradually increased because of many reasons. Accordingly, the trend on reducing the proportion of short-term capital for medium and long term loans under the regulation of Circular No.19/2017/TT-NHNN causes banks to use only 45 percent of short term capital for medium and long term loans since the beginning of 2018 and 40 percent since the beginning of the following year.
Meanwhile, survey shows that currently, 70 percent of depositors choose short term, and this proportion even amounts to 90 percent in many banks. Therefore, banks must raise long-term deposit rates to restructure the source. Once deposit rate edges up, banks are forced to increase lending rates.
At the same time, the fact that the State Bank sets 2018 credit growth target at 17 percent (lower than the 18.7 percent in 2017) and asks credit organisations to tighten control over capital flows into real estate market more closely causes banks to be prudent and raise lending rates.
For long-term borrowers, lending rates for home purchase, building and repair of houses at joint stock banks reached 12.5 percent/annum, up about two percent per annum from the previous period. Besides, with the fact that house and land price has heated up over the last period, banks have had the move of re-evaluating the price and only considered lending no more than 70 percent of the value, tightening preferences, raising penalties for interest paid in advance. This will have a strong impact on home borrowers.
In fact, not only in Vietnam, home borrowers in many countries in the world are also affected by increased interest rates. According to HSBC, interest rate increase is the top concern of those who are having home loans worldwide.
A survey of more than 10,000 people in 10 countries and territories also shows that 22 percent of respondents say that if lending rate increases two percent per annum, they will face difficulty and will be insolvent, 47 percent of them will go bankrupt if interest rates increase by five percent per annum.
Nguyen Hoang Minh, deputy director of the State Bank’s HCM City branch said currently, real estate loans account for about 10.8 percent of the total outstanding loans in HCM City. The outstanding loans in the city were about 1,800 trillion dong as of the end of 2017, of which, real estate loans were equal to 194.4 trillion dong. Compared to the beginning of 2017, real estate loans currently increased five percent out of the total outstanding loans, equal to nearly 10 trillion dong.
Minh said the State Bank’s HCM City branch has consecutively issued documents warning about real estate loans, including BOT projects. Recently, the State Bank issued Document No.563 asking credit organisations and foreign bank branches to shift credit structure towards focusing capital on production and business.
Accordingly, State Bank Governor Le Minh Hung requires credit organisations to limit the concentration of credit into real estate, construction sectors and balance capital sources, using capital for medium and long-term loans, ensuring liquidity.
In this context, financial and banking expert Nguyen Tri Hieu assesses that the lending rate increase in real estate sector along with the regulation on tightened lending is detrimental, limiting customers’ repayment ability.
