Mortgages on the rise as buyers take advantage of easy loan terms

May 12, 2009
Customers ask about mortgage procedures at an An Binh Bank branch in Ho Chi Minh City.

With the central bank easing restrictions on consumer lending since February, the number of mortgages are increasing, as genuine buyers take advantage of the continuing slump in property prices.

Bui Tan Tai, deputy general director of Asia Commercial Bank (ACB), said his bank now receives 30-40 applications for home loans every day, mostly in Ho Chi Minh City.

In April the number of applications increased 20 percent month-on-month and mortgage amount rose 15 percent, he said, adding customers mostly borrowed less than VND2 billion (US$112,400).

Bankers said the number of actual buyers has jumped since speculators are staying on the sidelines, thanks to the low liquidity in the real estate market.

Apartment prices in Hanoi and HCMC dropped as much as 40 percent in the first quarter, leading commercial real estate services firm CB Richard Ellis has said.

The prices of luxury and mid-end projects in Hanoi trended down 4-8 percent in the first three months, but low-end apartment prices went up 5- 15 percent by March, CBRE Vietnam’s executive director Richard Leech said last month.

Commercial banks increased consumer lending after the central bank removed the ceiling interest rate on consumer loans in February, allowing them to set the rate higher than the earlier 150 percent of the base rate. The key rate is now 7 percent.

ACB now offers home loans for 10 years at an annual interest rate of 12.75 percent. Tai said the term may be extended, but did not say when it could happen.

Navibank offers mortgages for up to 15 years at rates of 12.5 to 13 percent.

Last month, An Binh Bank announced that customers can borrow 90 percent of the value of a property, up from 70 percent earlier, for up to 20 years.

Nguyen Hong Son, deputy general director of Navibank, said the number of mortgage customers is increasing and his bank expects a further rise, especially from among low-income earners.

Deputy Minister of Construction Nguyen Tran Nam said last month the government plans to raise VND8 trillion ($450 million) by issuing bonds to build low-income housing around the country.

Many property developers like Lai Chau Construction Private Enterprise No. 1, Hanoi Construction

Corporation and Vietnam Construction and Import Export Corporation said in March they have invested or are ready to start investing in the low-priced property segment, banking on the housing needs of a large number of low-income earners.

With the luxury housing market in near-hibernation since mid-2008 due to tight monetary policies issued to contain inflation, analysts say several real estate companies have shifted their focus to moderately-priced homes.

“We have contacted some low-income housing investors and are waiting for them to come up with [cooperation] plans,” Navibank’s Son said.

Reported by Thanh Xuan

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