“Credit Thaw,” Mortgage Interest Rates Plummet to Just 5% per Year
Are you dreaming of owning a home? Well, now might be the perfect time to make that dream a reality! Agribank, one of Vietnam’s leading banks, has recently announced a significant reduction in mortgage interest rates. With rates as low as 6% per year for a maximum loan term of 6 months, Agribank is paving the way for homebuyers to fulfill their aspirations. And that’s not all – other banks are following suit, creating a favorable environment for aspiring homeowners.
Mortgage Interest Rates Drop Across the Board
Agribank is not alone in lowering its mortgage interest rates. Many other banks, including the Big 4, are also adjusting their rates in favor of homebuyers. For instance, BIDV, another leading bank, offers rates of 6.5% per year for the first 6 months and 7% per year for the next 12 months, with a minimum loan term of 36 months. For those looking for longer loan terms, the interest rates range from 7.5% to 8.5% per year, depending on the duration.
VietinBank offers competitive rates as well, with 5.7% per year for short-term loans and 6.45% per year for medium and long-term loans. Meanwhile, Vietcombank provides favorable rates starting from 6% per year for the first 6 months for short-term loans (under 12 months), or 6.3% per year for the first 6 months for medium and long-term loans.
Even foreign banks have significantly reduced their mortgage interest rates. Wooribank, for example, offers fixed rates of 5.3% per year for the first 6 months and 8.3% per year for the following 54 months. Alternatively, customers can choose a fixed rate package starting from 5.6% per year for the first year, 6% per year for the first 2 years, or 6.4% per year for the first 3 years. After the promotional period, the floating rates are calculated based on the average 12-month savings interest rate of the Big 4 banks plus a margin of 3.5% per year.
Shinhan Vietnam also provides fixed interest rates for 5 years, including options such as 5.5% per year for the first 6 months and 7.5% per year for the remaining 54 months. Customers can also choose fixed rates of 5.2% per year for the first 12 months, 5.5% per year for the first 24 months, or 6% per year for the first 36 months.
For commercial joint-stock banks, mortgage interest rates range from 5% to 8.5% per year during the promotional period. ACB, for instance, offers an average interest rate of 8.24% per year for short-term loans and 9.82% per year for medium-term loans. Additionally, BVBank provides the lowest interest rate of 5% per year, and after the promotional period, the floating interest rate is calculated based on the base rate plus a margin of 2% per year.
VPBank’s mortgage interest rates are set at 5.9% per year for the first 6 months, and after the promotional period, the floating interest rate is calculated based on the reference rate plus a margin of 3% per year. TPBank also offers promotional rates of 7.5% per year for customers choosing the 12-month package, or 8.6% per year for the 24-month fixed package, and 9.6% per year for the 36-month fixed package. Alternatively, customers can opt for a 0% interest rate for the first 3 months, followed by 9% per year for the subsequent 9 months.
“Thawing” Credit to Boost the Economy
The State Bank of Vietnam’s data indicates a negative growth trend in credit as of the end of February 2024. Several factors contribute to weak loan demand, including a slowdown in consumer loan applications, which account for 20% of the total credit balance. One contributing factor to the decline in consumer loan applications is the sluggishness in real estate loans.
In 2023, the real estate credit increased by 6.75%, with a decrease of 0.7% in consumer real estate loans and a significant increase of 22% in business real estate loans. However, the estimated credit balance for the real estate sector at the end of 2023 was around 2.75 quadrillion VND, with the actual credit amount for business real estate being only slightly over 1 quadrillion VND.
Among the total real estate loans, two-thirds are for buying and renovating homes. Therefore, one key to unlocking credit growth lies in rejuvenating consumer real estate loans. This will not only stimulate consumer spending but also promote overall economic growth. Encouraging consumer loan applications has become a priority for the State Bank of Vietnam, which has instructed commercial banks to actively supply capital to support the economy, businesses, and individuals in need of capital for production and business activities. In addition to the government’s priority sectors, the State Bank of Vietnam has also directed commercial banks to focus on consumer lending. Strengthening consumer loans will create favorable conditions to boost consumer spending, thereby enhancing production demand.
The State Bank of Vietnam plans to review and adjust regulations and mechanisms to facilitate more effective lending in this sector, particularly for financial companies. This will ensure efficient capital support for real estate loans.
According to financial policy expert Dr. Can Van Luc, with the current downward trend in interest rates, mortgage and home improvement loans are expected to rebound in 2024. The most important factor in stimulating homebuyers is not only the lower cost of borrowing but also the increasing disposable income, which ensures borrowers’ ability to repay their loans.
Moreover, after a prolonged period of difficulty in accessing capital, both businesses and homebuyers now have more access to funding. Banks have been actively providing loans worth trillions of VND to project developers, part of which is allocated for homebuyers within those projects.
On the flip side, Professor Nguyen Huu Huan from the University of Economics in Ho Chi Minh City points out that even with lower interest rates, the current low demand for loans among the population will impede real estate credit growth. Professor Huan further analyzes that despite the stagnant real estate market with high prices, the demand for purchasing or investing remains low. Additionally, lower valuations for real estate loans are also contributing to the decline in individual credit.
Therefore, Professor Huan suggests that in order to boost real estate credit growth, there should be solutions such as providing long-term loans with more favorable interest rates through capital support from the State Bank of Vietnam.
So, if you’ve been considering buying a home, now is the time to take advantage of these historically low mortgage interest rates. Agribank’s bold move has prompted other banks to reduce their rates as well, creating a promising market for aspiring homeowners and investors. With attractive rates and favorable conditions, the real estate market is poised to regain its vibrancy. Make your dreams of homeownership a reality today!