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High interest rates on real estate loans keeping clients away
Commercial banks have been pushing deposit interest rates up to nearly 9 percent, while pushing loans to fund house and land purchases at interest rates of over 12.5 percent. The high lending interest rates have been keeping clients away.
According to Tran Phuong Binh, General Director of DongA Bank, the bank has 1,300 trillion in outstanding loans to fund land and house purchase deals, and it plans to increase this category of loans by 15 percent this year.
Asia Commercial Bank said it every day deals with 50 applications for borrowing money to purchase real estate, while it disburses money to 20.
An Binh Bank and Bao Viet Bank have announced they have raised credit limits to 90 percent of the value of the real estate clients plan to purchase, the level applied when the real estate market was hot.
Nguyen Van Huong, General Director of Lien Viet Bank, said that individual clients who borrow money to purchase land and houses prove to be one of the main clients of banks now, when it is difficult to find borrowers and interest rates are low.
Tran Minh Khoa, Personal Banking Deputy Director of Eximbank, said that it is now the right time for banks to lend to individuals to fund their house and land purchases, as real estate prices have dropped sharply in comparison with early 2008.
Though banks’ doors have been opened wide, a lot of clients have cancelled plans to borrow money from banks after learning about formalities, interest rates and other conditions. The biggest barrier is high interest rates.
Lending interest rates applied for consumer credit are negotiated by banks and borrowers, while this kind of credit is not capped by the ceiling lending interest rate of 10.5 percent. Currently, the most popular interest rate for consumer credit is 12.5 percent.
Some commercial banks have been applying very high interest rates. HSBC, for example, lends at 24 percent per annum (with no mortgage required). Other banks are lending at 13 percent.
Bui Tan Tai, Deputy General Director of ACB, said that banks have to set high lending interest rates for this kind of credit due to its high risks.
The general director of another bank said that instead of spending several trillion to develop the social housing programme, the state should spend money to give interest rate support to those who purchase low-cost or medium-class accommodations. Currently, only high-income earners dare borrow money to purchase houses.
In HCM City, a lot of apartments priced at below 600 million dong, like the ones at Saigon Moi (new Saigon), Le Thanh and Nam Long projects, are still unaffordable to many people. They do not have money to pay the interest rate of 10 percent every two or three months for 1.5-2 years. Meanwhile, it would be a heavy burden on them if they borrowed money from banks.
A lot of banks wish to provide loans to help people buy apartments at big real estate projects in district 2, Phu My Hung, Districts 4, Binh Chanh and Binh Thanh. However, if people borrow 500 million for 10 years, they will have to pay an interest sum nearly equal to the value of the loan.
VietNamNet, TP
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