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Banks hike interest rates of home loans
The Saigon Times Daily
Monday,  Jul 16, 2018,17:15 (GMT+7)

Banks hike interest rates of home loans

The Saigon Times Daily

A view of condo projects in HCMC. Commercial banks have carefully assessed real estate projects before providing loans – PHOTO: TL

HCMC - Most of the local banks have further tightened credit for the real estate sector by raising the annual interest rates for home loans by one to two percentage points compared with earlier this year, leading the sector to slow down, reported Sai Gon Giai Phong newspaper.

Vietnam Export Import Bank’s current interest rate for home buyers is 11%, up by one percentage point. Meanwhile, the rates are 11.5-12% at Orient Commercial Bank, Saigon-Hanoi Commercial Bank and VietCapital Bank, and 12.5% at Saigon Thuong Tin Commercial Bank and Viet A Commercial Bank.

In addition, banks have carefully assessed real estate projects before providing loans, which are equivalent to 30-50% of the property project values instead of the earlier 70-80%.

In HCMC, many banks have provided loans only for projects with investment certificates, while others have stopped lending to those who wish to buy land in the city.

As a result, banks’ tightening policy over property loans has hindered the business of small investors. Hung Anh, a resident of Binh Thanh District, said he had borrowed VND1 billion from a bank last year to buy a plot of land worth VND1.5 billion. However, the bank later agreed to lend him only VND700 million with an interest rate of nearly 12%, as opposed to the earlier offer of 9.5%, causing him to halt his purchase decision.

Similarly, Minh Hang, a resident of District 3, took advantage of the preferential lending rates last year and invested in an apartment project in District 9. But she stopped investing in the project in the second phase as she was no longer offered low rates.

According to a representative of the Khang Thinh Real Estate Group, many investors have shown interest in land lots in the outlying districts 2, 9, Binh Chanh and Nha Be. However, the market has cooled down as banks have set stricter requirements for home loans.

Moreover, banks have stopped offering preferential home loan packages for homebuyers, affecting property investors, especially those who buy apartments. These customers are unable to afford apartments because of the banks’ higher lending rates and difficulties in accessing credit sources, leading to the slow sale of apartments.

Earlier this year, State Bank of Vietnam (SBV) had set the credit growth target for 2018 at 17% and asked credit institutions to closely monitor the credit growth and prioritize pumping capital into production and business activities, while reducing lending to risky sectors, such as real estate and securities. In addition, the central bank allowed banks to use only 40%, instead of 60%, of the short-term capital for medium- and long-term loans.

Nguyen Hoang Minh, deputy director at SBV’s HCMC branch, noted that property credit in HCMC had plummeted from a high proportion of more than 30% ten years ago to 10% over the last three years. Credit institutions in the city have frequently been required to provide loans to investors with financial and administrative capacity, thus reducing the proportion of bad debts in HCMC’s housing sector to 2-2.5%.

Although the property sector’s outstanding loans are under control, experts have proposed paying attention to the high outstanding consumer loans, as most of these loans have been poured into real estate projects. Consumer credit posted a three- to four-fold increase over the country’s average credit growth last year.

As of March, the city’s outstanding consumer loans hit some VND220 trillion, with VND63.14 trillion being spent on housing projects, accounting for 28.7% of the total loans.

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