Will record low home loan interest rates push credit up?

Seize the moment

Mr. Nguyen Duc (Hai Ba Trung, Hanoi) said that he and his wife have just decided to borrow 1.2 billion VND from the bank to buy an apartment. "I consulted many friends who are paying installments to the bank and found out that the interest rate they are paying for old loans is up to 12 - 14%/year. So the preferential interest rate of 6%/year is quite comfortable for my family," said Mr. Duc.

According to Mr. Duc's family's calculations, about 2 years ago, the interest rate for home loans was about 10%/year. If the loan was 1.2 billion VND, each month the bank would have to pay 10 million VND in interest. With a preferential interest rate of 6%/year, the monthly interest would only be about 6 million VND, reducing the financial pressure.

The interest rate for loans to buy real estate, repair houses... at banks is quite low, with interest rates of about 5 - 6%/year appearing at many banks.

For example, Saigon - Hanoi Commercial Joint Stock Bank (SHB) is applying preferential interest rates from 5.79%/year for customers borrowing to buy houses, with loan terms of up to 25 years and can borrow up to 90% of the value of the property intended for purchase.

Similarly, Saigon Thuong Tin Commercial Joint Stock Bank (Sacombank) also offers 10,000 billion VND in preferential loans for customers who want to buy, build, or repair real estate; buy cars... with interest rates starting from only 6.5%/year.

Or at the Vietnam Joint Stock Commercial Bank (BVBank), home loan interest rates are being implemented with many flexible options from 4.99%/year in the first 6 months of the loan, 5.99%/year in 9 months, 6.49%/year in 12 months, 7.49%/year in 18 months and 7.9%/year in 24 months...

Attractive interest rates are also available at major banks. Accordingly, the Bank for Investment and Development of Vietnam (BIDV) has launched a housing credit package with interest rates starting from 5% per year, loan terms up to 30 years, and a maximum limit of 100% of capital needs.

Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) also reserved 50,000 billion VND for individual customers to borrow to buy houses, repair houses, buy cars, take out consumer loans... with preferential interest rates from only 4.9%/year in the first 6 months for loans under 24 months and from 5%/year in the first 12 months for loans over 24 months...

At 100% foreign-owned banks, interest rates are also very attractive. Specifically, Shinhan Bank Vietnam Limited is applying a fixed loan interest rate of 5.2 - 6%/year for the first 1 - 3 years.

Similarly, HSBC Vietnam Bank is lending to customers at an interest rate of 5.5%/year for 25 years, with a maximum loan value of up to 70%.

Credit push

In fact, at Vietcombank, General Director Nguyen Thanh Tung said that retail credit balance, most of which is home loans, accounts for nearly 20% of the bank's total outstanding loans. However, the decline in home loans in the first months of the year has caused retail credit to decline.

The reason Mr. Tung pointed out is that the real estate market is still facing many legal difficulties, limited supply and declining incomes of people, leading to a cautious mentality when deciding to buy a house at this time.

In addition, another bank leader said that credit limits for customers are now tighter, only lending about 50% of the value of the collateral instead of 70% as before, putting great pressure on home buyers' equity.

However, many experts are quite optimistic about the possibility of credit increasing in the coming time.

According to Dr. Can Van Luc, an economic expert, real estate credit currently accounts for 1/5 of the total outstanding credit of the economy. The early application of new laws such as the Land Law, Housing Law, Real Estate Business Law, and Credit Institutions Law… 5 months ahead of schedule will contribute to promoting the recovery of the real estate market.

"Therefore, real estate credit in particular and banking operations in general will improve in the second half of the year, especially when interest rates remain low," Mr. Luc commented.

Sharing the same view, Dr. Le Xuan Nghia, an economic expert, said that real estate is still an important capital channel for banks, especially in the low-cost housing segment.

However, Mr. Nghia commented that the social housing segment is still facing regulatory barriers regarding subjects, procedures, etc. Therefore, it is necessary to redesign policies to promote low-cost housing in addition to developing social housing, in order to increase supply in accordance with people's financial situation.

Although low interest rates are very attractive to those who need to borrow money to buy or repair a house, Dr. Nguyen Tri Hieu, an economic expert, recommends that people carefully consider their financial capacity before deciding to borrow money. Because low interest rates are usually only applied for a short time, and can increase later.

"Therefore, borrowers need to carefully consider how the interest rate after the preferential period is calculated and what the margin is. In order to avoid being burdened by the pressure of repaying bank loans, they should calculate so that the amount of money to repay the bank loan, including principal and interest, does not exceed 50% of monthly income," Mr. Hieu advised.

Experts predict that low lending rates will last until the end of 2024, but may increase thereafter if the economy recovers and credit increases. Banks will adjust their savings interest rates upward, leading to higher home loan interest rates next year than they are now.

Therefore, experts recommend that customers should prioritize choosing loan packages with fixed interest rates for a long time, to stabilize financial plans and avoid risks from changes in market interest rates.

Source: https://baohaiduong.vn/lai-suat-cho-vay-mua-nha-thap-ky-luc-co-day-tin-dung-bat-tang-387376.html