High interest rate
In early 2020, Ms. KB and her husband (living in Binh Thanh District, Ho Chi Minh City) borrowed 11 billion VND from Sacombank to buy real estate, the interest rate for the first 12 months is 12.5%/year. According to the loan contract, after this period, the interest will be adjusted according to the interest rate (LS) of 13-month savings deposits (interest received at the end of the term) plus a margin of 5.5%/year. The loan interest rate is adjusted every 3 months. Recently, the bank calculated the interest rate for this loan up to 17%/year. When Ms. KB was upset at the bank and requested to repay the debt early, the bank reduced it to 14%/year. However, because the interest rate was too high, Ms. KB's family still intended to repay the debt early, but encountered a problem with the early repayment penalty fee of 2% on the amount of 10 billion VND, equivalent to 200 million VND. Ms. KB was upset: "My family has been paying off debt for 3 years, at that time the Covid-19 pandemic happened, but the bank calculated like this, there is nothing to share with customers in difficult times."
Banks need to reduce interest rates soon
Many cases like Ms. KB show that the current lending interest rate level in the market is still quite high. Our survey at the present time also confirms this. On the afternoon of June 26, a Vietinbank credit officer in Ho Chi Minh City named V. advised us: For production and business loans, the lending interest rate is from 7.5 - 8%/year but on the condition that the borrower must prove cash flow. For example, the customer must have a contract and open an account to receive payments through Vietinbank, the loan term is a few months.
For service business loans, this employee said that this is a difficult industry to lend because customers often have to complete the service before receiving payment. As for real estate loans, the loan interest rate for the first 12 months is 9.5%/year. After the preferential period, the loan interest rate will be calculated by the base interest rate plus a margin of 3.5%. With the current base interest rate at 9.5%, the loan interest rate is 13%/year. The penalty fee for early repayment in the first two years is 2.5%, the third year is 1.5%, the fourth year is 1%, the fifth year is 0.5% of the amount paid early. From the sixth year onwards, there is no penalty fee.
Similarly, according to a sales staff of ACB Bank named H. (in Ho Chi Minh City), home loans currently have a preferential program for the first 6 months of 9.5%/year, or a fixed program for 12 months of 10%/year. After the preferential period, the loan interest rate will be calculated by the base interest rate plus a margin of 3.9%. The current base interest rate is 9.5%, so the loan interest rate is about 13.4%/year. This loan interest rate changes every 3 months. According to H., the bank's current lending interest rate has decreased compared to the beginning of the year. Most recently, the base interest rate has decreased by 0.3%.
Also because the interest rate is too high, many customers do not dare to borrow, combined with a large number of customers unable to access credit, the credit growth rate in the first 6 months of the year is still low. Some banks have launched programs to reduce lending interest rates, but only "very good" loans can access the 7%/year interest rate, the rest average from 9 - 10%/year and many old loans are up to 13 - 14%/year.
Bank of collection
Although the current lending interest rate level in the market has decreased compared to the end of 2022 - early 2023, it still cannot keep up with the decline in deposit interest rates. Some banks have recently continued to reduce deposit interest rates in VND by 1.25 - 3%/year compared to the beginning of the year. Deposit interest rates of 9 - 12%/year or higher have almost disappeared, and 8%/year is still scattered in some banks. For example, Cake by VPBank has just reduced deposit interest rates by 0.2 - 0.3%/year.
Accordingly, the interest rate for savings with terms under 6 months is 4.75%/year, 6 - 11 months is 7.9%/year, 12 months is 8.2%/year, 13 months is 8.3%/year, from 15 months and up is only 7.2%/year. LPBank reduces the mobilization interest rate from 0.2 - 0.8%/year. Specifically, under 6 months is from 4.53 - 4.65%/year, 6-month term has interest rate of 5.82%/year, 12 months is 6.1%/year, 13 months is 6.24%/year. The highest interest rate is for 18-month term at 6.49%/year. However, longer terms have much lower interest rates, terms from 36 - 60 months down to 5.29%/year. ABBANK also reduced its deposit interest rate to a low level, the highest interest rate of this bank is 7.4%/year... Some commercial banks reduced their deposit interest rate to a level lower than the ceiling interest rate allowed by the State Bank.
In general, the current interest rate for deposits of 12 months or more from banks is 6.2 - 8%/year. However, the interest rate for loans, especially for individual customers, is up to 13 - 14%/year. With this difference, the bank makes a big profit.
Interest rates on the interbank market increased slightly for short terms at the end of last week, but compared to the beginning of June, they are still 1.4 - 3% lower per year. Specifically, the interest rate on June 26 for overnight terms was 1.1% per year, 1 week 1.45% per year, 2 weeks 1.88% per year, 1 month 3% per year, 3 months 4.8% per year. The interest rates for 6 and 9 months remained at 5.9% per year and 6.8% per year, respectively.
Mr. Le Hoang Chau, Chairman of the Ho Chi Minh City Real Estate Association (HoREA), said that with the current rapid rate of interest rate reduction, banks still justify that there needs to be a delay to reduce loan interest rates, which is difficult to accept. In loan contracts, banks stipulate that loan interest rates are adjusted every 3 or 6 months. The decision to adjust loan interest rates lies with the authority of commercial banks, so why can't they be adjusted? Banks often make statements expressing their sympathy and support for customers, but the above "explanation" is not suitable for the current situation.
According to Mr. Le Hoang Chau, the net interest margin (NIM0 of banks is around 2 - 2.5%) is reasonable. However, the margin added to lending interest rates from 3.5%, not to mention the banks using "technical" measures to adjust the base interest rate, needs to be reviewed. Mr. Le Hoang Chau cited that banks expect profits in 2023 to increase by 10% compared to 2022. However, the average net profit of 28 banks in the past 3 years is around 21%, too high compared to the difficulties of the business community and the economy. Therefore, banks need to share more with borrowers in the coming time.
"For real estate businesses, accessing capital at this time is a dream. However, banks do not lower credit standards in this extremely urgent situation. Keeping credit standards at normal times is not good. There needs to be a solution to support real estate businesses in accessing capital at this time," Mr. Le Hoang Chau emphasized.
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