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Home loans could turn into nightmare
Many commercial banks are offering to loan would-be buyers of apartments as much as 90 per cent of the purchase price repayable over 20 years.
But high interest and the conditions of the loans could turn the owning of a home from a dream to a nightmare for low-to-middle-income earners.
The Asia Commercial Bank offers to loan 80 per cent of an asset’s collateral value for 10 years at a yearly 12.75 per cent.
The Viet Nam International Bank (VIB Bank) is even more liberal.
It with Sacombank, SeABank, ABBank, Habubank and Techcombank are offering 70-90 per cent of money to buy an apartment over 20 years.
All the interest rates are about the same.
VIB Bank Retailing Sector, real-estate, director Vo Thi Thanh Tuyen told Viet Nam News that her bank also supported customers in the transfer of property consultancy and an introduction to project developers.
The campaign is not confined to domestic banks.
The Australia and New Zealand Banking Group Ltd (ANZ) allows its customers to borrow up to 70 per cent of an asset’s collateral value with interest rates ranging from a yearly 11.3-12 per cent over 20 years.
ANZ’s Retail Branch Manager at No 14 Le Thai To Street Vu Thanh Thuy told Viet Nam News that a 20 year term was much better for borrowers than 10-15 years.
The price of apartments had been more stable since August; and from the beginning of this year, the volume of potential buyers had increased by about 300-350 per cent, said ACB Real Estate JSC general director Pham Van Hai.
Many low- to middle-income earners asked by Viet Nam News agreed that apartment prices were lower than last year and coupled with the bank campaigns, they assumed now was the time for them to buy.
"The tenure of the loan is very important to me," explained State-owned company employee Minh Tuan.
"Fifteen to 20 years is suitable to me, if the interest rate is affordable."
The average first-year interest rate for buying a residence is about 12 per cent; it is then either variable based on the market rate or equal to the 12-month deposit rate plus fees for mobilising capital.
Not so easy
So-called low-price apartments have mushroomed.
But many people, who have tried at least once to buy, find the interest rates and loan conditions daunting.
" A borrower of VND200 million (US$11,200) at 12 per cent will have to pay lending interest at VND2 million ($111.1) each month, said Dang Tu, who has raised money to buy an apartment in Viet Hung urban precinct of Ha Noi’s Long Bien District.
"If he borrows over 60 months, or five years, he will have to pay an extra VND3.3 million ($183.3) for the loans. His total monthly payments to the bank will be VND5.3 million ($294.4) per month to the bank.
"How can low-income earner survive under such a heavy monthly burden?" he asked.
Private Hai Phong import-export seafood company employee Do Thi The said: "Banks might offer big long-term loans. But will the interest they charge remain static?
"If I don’t have a good stable income, how will I deal with the worst case if it arises. It’s a long road to my dream."
ACB Deputy General Director Nguyen Thanh Toai offers this explanation: "Lending to low-income earners for housing is a paradox.
"Those who are eligible to buy low-priced apartments often can’t meet requirements of banks. But people who can meet the requirements are often not eligible for low-priced apartments."
"Thus, credit for low-income earners has not boomed."
Banks also build risk barriers against lending to low-income earners.
As the director for individual customers at a Ha Noi-based bank told Viet Nam News: "Banks are just finance brokers. If they loosen the lending requirements for low-income earners, they will put the security of the system at risk."
He advised: "Low-income earners should go to the Viet Nam Bank for Social Policies where interest is about 2.9-3 per cent per year and lending requirements are easier, rather than seek loans at commercial banks."
"Vietnamese incomes are rather low and complex borrowing procedures do not encourage people to access bank loans," Tuyen from VIB Bank said.
The bank campaign will help many people buy accommodation and perhaps vitalise the low-priced apartment market.
But borrowers should be very cautious about taking out loans that will become a struggle to repay.
Ha Phuong
VIETNAMNEWS
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