That was the judgment of Trinh Bang Vu, Head of Retail Division of Shinhan Bank Vietnam Ltd
How did this expert evaluate the application delay of the State Bank of Vietnam (SBV)’s Circular 22/2020/TT-NHNN on short-term capital reduction for medium and long-term loans?
Recently, SBV had consulted credit institutions in writing on the amendment and supplementation of Circular 22/2019/TT-NHNN, including delaying the roadmap to apply the maximum rate of short term capital for medium long term loans.
Accordingly, there were two options given. First, banks would continue to hold a maximum rate of 40 percent of short-term capital for medium-long-term loans until March 31, 2021, and would gradually lower following the old rate in the next year. Second, banks would maintain the rate of 40 percent until the end of September 30, 2021, and decrease gradually after that.
In Vu’s opinion, regardless of the plan, the extension of the application roadmap as above was suitable with the current context, especially when the Covid-19 pandemic had harmed almost all fields and was still evolving complexly. This decision would have a positive impact on both the credit market and the real estate market.
So would the credit for individual home loans in the second half of 2020 as well as in 2021 be more positive?
As we all knew, the Covid-19 epidemic was affecting the Vietnamese economy as well as in the world. In the first six months of 2020, Vietnam’s gross domestic product (GDP) only increased by 1.81%, which was the lowest level in the first half of the year for the whole period between 2011 and 2020.
In that context, the recovery of the economy depended heavily on the ability to control translation, and in our opinion, all predictive scenarios were uncertain.
However, with the excellent control of the epidemic and the positive economic growth in the first half of the year, production and business activities in general and house-buying credit, in particular, would gradually recover and grow again in 2021.
What was the barrier in home lending for individual customers today?
Typically, there were three main barriers in the residential credit market of individual customers. The first was the price. At present, the average house price, especially in urban areas, was still quite high compared to the average income of the majority of people wishing to buy a house. Besides, home loan interest rates in Vietnam were also higher than in other countries in the region, thereby having a direct impact on housing prices.
The second was the legal aspect of real estate management, especially related to the products of the project segment such as apartments, condotels, which hindered the housing market from removing the bottlenecks for a more favourable development.
The third was capital participating in the market, mainly the weakness of the equity capital of investors, leading to dependence on bank loans or from the corporate bond market. Currently, there were many concerns about the massive capital mobilisation from this market with buyers who were mainly non-professional individual investors, leading to risks.
This was one of the reasons why regulators had to control more closely the capital mobilisation in the corporate bond market recently.
The expert had mentioned that the home loan interest rate was low, so how was Shinhan Bank’s mortgage interest rate?
Currently, Shinhan Bank Vietnam was applying interest rates to individual customers who bought houses at around 7.5 percent per year (fixed in the first year), 8.3 percent per year (fixed in the first two years) and 9.4 percent per year (fixed for the first three years). After the preferential period, the loan would be applied with the floating rate according to the formula of ‘Base rate + amplitude’. Currently, the total floating interest rate (based on the formula interest rate + amplitude) of Shinhan Bank was only about 10 percent per year, and the common ground in the market was 11 percent to 13 percent per year.
The maximum amount of home loan for each specific customer depended on the valuation of the collateral to secure the loan, as well as the ability to repay each customer under the rating framework. At the Bank, up to 70 percent of the valuation of real estate was residential in Hanoi and HCM City.
Of course, the final loan amount depended on the ability to repay each customer such as total income, the remaining amount to repay each month after deducting other expenditures and loans with the specific recommended loan period.
