The State Bank of Vietnam (SBV) oriented commercial banks to not increase lending rates in 2019. However, due to the pressure from external factors, plus the restriction of credit growth room and interest rate competition, the personal lending rates are on the rise, etc.
Home loan interest rates increase
Compared to the beginning of the year, many banks have raised interest rates for home purchase loans, home repair loans, car loans to 13-13.5 percent per annum. The consumer lending and credit card interest rates are much higher, reaching 40-50 percent per annum. Due to the Net Interest Margin (NIM) in consumer lending is fairly high, credit institutions providing capital do not hesitate to mobilise high interest rates.
The tightening of short-term funds used for medium and long-term lending to 40 percent from the beginning of the year and in the future is gradually affecting real estate lending, especially for home loans. The gradual increase of home loan interest rate level, according to financial expert Dr Dinh The Hien, is also a result of the tightening of short-term funds used for medium and long-term lending in accordance with Circular 19/2017/TT-NHNN.
According to Dr Nguyen Tri Hieu, a banking and finance expert, the interest rate increase will affect the ability pay debts of people. In addition, when interest rates increase, the access to bank loans to buy real estate will be affected, especially when credit is no under pressure.
The current interest rates for home loans are on the rise, because the source for home loans are mainly on medium and long term from one year and more. Some banks even offer loans on a 20-year term. Export Import Commercial Joint Stock Bank (Eximbank) is offering a 24-month and 36-month preferential lending rate of up to 11 percent per annum, while that is 13.5 percent per annum at Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank) and 12.2 percent per annum at Vietnam Thuong Tin Commercial Joint Stock Bank (VietBank). After the preferential period, banks will continue to add interest rate amplitude.
At Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank), the home loan interest rate is fixed at nine percent per annum in 12 months, 8.9 percent per annum in 24 months and 9.4 percent per annum on 36 months. Compared to banks with 100 percent foreign capital, this interest rate level is still higher, but the level is still lower than state-owned banks. Commercial Joint Stock Bank for Investment and Development of Vietnam (BIDV) is currently applying interest rate for home loans at 11.4 percent per annum while it is 11 percent per annum at Commercial Joint Stock Bank for Industry and Trade of Vietnam (VietinBank).
Input costs are difficult to fall
For the group of private joint stock banks, the interest rates for home loans are ranging from 11 percent to 13.5 percent per annum, up by about one to 1.5 percent per annum compared to the beginning of last year. Specifically, Lien Viet Post Commercial Joint Stock Bank (LienVietPostBank) is listing interest rate for home loans at 11.3 percent per annum. Meanwhile, at Vietnam International Commercial Joint Stock Bank (VIB), the interest rate for home loans is fixed at 7.9 percent per annum in six months, but customers have to bear floating interest rates from the seventh month onwards.
Meanwhile, for the group of smaller-scaled banks, the home loan interest rates have been pulled up to 12-13 percent per annum, up by about two percent compared to the beginning of 2018, because those banks have been sharply raising the long-term input interest rates to balance the capital in accordance with Circular 19/2017/TT-NHNN.
Saigon Securities Incorporation (SSI) Retail Research said that interest rates will decline on short terms, because interbank rates are currently low. Report on the capital market of SSI analysts showed that the interest rates slightly increased on the interbank market. The rates on market 1 were stable at 4.1-5.5 percent per annum on terms of less than six months, 5.5-7.45 percent per annum on terms of six months to less than 12 months, and 6.4-7.8 percent per annum on 12 and 13-month terms. Some banks with small market share in capital mobilisation apply rates of above eight to nine percent.
The credit growth in the end of May 2019 was 5.74 percent, 0.48 percent lower than the same period of 2018. The credit and mobilisation grew at the same rate in the first half of 2018. Meanwhile, in the first five months of 2019, the mobilisation growth was lower than credit growth. The pressure of mobilising capital of commercial banks is still high and mobilisation interest rates can hardly be cut, particularly on long terms. On the other hand, commercial joint stock banks also want to extend the interest rate gap between short and long terms to create the attractiveness for the long terms, thereby increasing the proportion of medium and long-term capital mobilisation.
