Econ
Banks up interest rates for realty loans
Many commercial banks have increased interest rates for house purchase and repair loans for concern of high risks in the wake of drastic price hike in the real estate market recently.
Eximbank on May 2 approved new rates for property loans and home repair loans. Accordingly, the annual interest rate for 12-24 month loans will rise by 1 percentage per year to reach 11 percent per year for the first two years.
Many other joint stock commercial banks also increased interest rates for medium-term loans for house purchase or repair by some 1-2 percentage points to 11-12 percent per year.
Despite the hike, banks said that demands for such loans remain high. For example, VietABank, which is offering loans at 12.38 per cent per year, continues to receive a high number of loan applications.
Banks have also tightened lending regulations on such loans. They are only lending 30-40 percent of the value of a property they want to buy, not 70 percent of the value of the asset, as was done previously.
Besides, the State Bank of Vietnam (SBV) has also set more stringent lending requirements on property loans since early this year. In light of the SBV’s Circular No.19/2017/TT-NHNN prescribing limits and prudential ratios in operations of credit institutions and foreign bank branches, the maximum ratio of short-term capital sources used for medium and long-term lending at banks and foreign bank branches reduced to 45 percent as of January this year from 50 percent last year. The ratio will continue to reduce to 40 percent from January 1 next year.
Nguyen Hoang Minh, deputy director of the SBV’s branch in Ho Chi Minh City, said that SBV had warned commercial banks to carefully consider property loans and issue new regulations to protect themselves from loans to investors who may face losses if property prices stabilize or decline in value.
Early this year, SBV issued a statement, requiring lenders to tighten control of investment loans intended for the real estate and securities markets, warning risks of bad debt.
Under the SBV’s statement, lenders should avoid focusing on stock and real estate customers and maintain credit growth in these sectors within safe limits. They have to keep track of their debtors' finances and the progress of their projects, it said.
“Credit expansion should go hand in hand with strict supervision to ensure loans are used for the purposes they are intended for and do not add to bad debt,” the statement said.
The central bank said lenders should divert their focus from “risky areas” to the manufacturing sector, and give priority to agriculture, exports, supporting industries and high-tech investments.
SBV Deputy Governor Nguyen Thi Hong said that SBV will maintain strict control this year as Vietnam's economy has become more open and vulnerable to fluctuations on the global market.
Bad debt in Vietnam's banking sector, mostly incurred due to a slowdown in the country’s real estate market in the early 2010s, had been cut to 2.34 percent by the end of September 2017, down from 2.46 percent at the end of last year, according to SBV.
Nguyen Quoc Hung, director of the SBV’s Credit Department, said that credit growth in risky areas had been successfully controlled in 2017. The real estate sector reported 8.56 percent in credit growth last year, compared to 12.86 percent in 2016, he said.
The General Statistics Office reported that Vietnam’s credit growth was 2.23 percent in first quarter of this year while it was 2.81 percent in last year’s first quarter. SBV this year targeted credit growth of 17 percent compared with last year’s 18.17 percent.
Interest rate for 12-24 month property loans at Eximbank is 11 percent per year
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Despite the hike, banks said that demands for such loans remain high. For example, VietABank, which is offering loans at 12.38 per cent per year, continues to receive a high number of loan applications.
Banks have also tightened lending regulations on such loans. They are only lending 30-40 percent of the value of a property they want to buy, not 70 percent of the value of the asset, as was done previously.
Besides, the State Bank of Vietnam (SBV) has also set more stringent lending requirements on property loans since early this year. In light of the SBV’s Circular No.19/2017/TT-NHNN prescribing limits and prudential ratios in operations of credit institutions and foreign bank branches, the maximum ratio of short-term capital sources used for medium and long-term lending at banks and foreign bank branches reduced to 45 percent as of January this year from 50 percent last year. The ratio will continue to reduce to 40 percent from January 1 next year.
Nguyen Hoang Minh, deputy director of the SBV’s branch in Ho Chi Minh City, said that SBV had warned commercial banks to carefully consider property loans and issue new regulations to protect themselves from loans to investors who may face losses if property prices stabilize or decline in value.
Early this year, SBV issued a statement, requiring lenders to tighten control of investment loans intended for the real estate and securities markets, warning risks of bad debt.
Under the SBV’s statement, lenders should avoid focusing on stock and real estate customers and maintain credit growth in these sectors within safe limits. They have to keep track of their debtors' finances and the progress of their projects, it said.
“Credit expansion should go hand in hand with strict supervision to ensure loans are used for the purposes they are intended for and do not add to bad debt,” the statement said.
The central bank said lenders should divert their focus from “risky areas” to the manufacturing sector, and give priority to agriculture, exports, supporting industries and high-tech investments.
SBV Deputy Governor Nguyen Thi Hong said that SBV will maintain strict control this year as Vietnam's economy has become more open and vulnerable to fluctuations on the global market.
Bad debt in Vietnam's banking sector, mostly incurred due to a slowdown in the country’s real estate market in the early 2010s, had been cut to 2.34 percent by the end of September 2017, down from 2.46 percent at the end of last year, according to SBV.
Nguyen Quoc Hung, director of the SBV’s Credit Department, said that credit growth in risky areas had been successfully controlled in 2017. The real estate sector reported 8.56 percent in credit growth last year, compared to 12.86 percent in 2016, he said.
The General Statistics Office reported that Vietnam’s credit growth was 2.23 percent in first quarter of this year while it was 2.81 percent in last year’s first quarter. SBV this year targeted credit growth of 17 percent compared with last year’s 18.17 percent.
