As banks’ liquidity has improved, they have resumed consumer credit after a long period of tightening loans. However, they do not have many clients, since high interest rates make the loans inaccessible to many people.
It seems to be the right time now for banks to expand real estate credit as Vietnamese people always need money to purchase houses at the end of years, so that they can celebrate the Lunar New Year in new homes.
Asia Commercial Bank (ACB), for example, has announced the resumption of its real estate credit programme after it halted the programme in June 2008. The bank has announced loans worth VND500 billion for clients who have real demand for accommodations. The sum is being disbursed until the end of October 2008. ACB General Director Ly Xuan Hai said that if the loaning goes smoothly, the bank will inject more money in the programme.
However, to banks’ surprise, not many clients are seeking loans from banks at this moment due to the overly high interest rates, though the demand for accommodations remains very high.
Hai said he well knows that the lending interest rates are unaffordable to many people. However, he said that the bank cannot offer lower interest rates as it still has to mobilise capital at high interest rates. ACB is now offering loans at the interest rate of approximately 21%, the ceiling lending interest rate stipulated by the central bank.
Hai also said that the bank has set stricter requirements on borrowers. Clients can borrow sums of money which are not higher than 70% of the value of their mortgaged assets. They have to pay principals and interest rates after 3-5 years instead of 10-30 years as previously stipulated. Loans will only be given to young families with high incomes and high payment capability.
Sacombank has been providing consumer credit since the beginning of the year with the capital sourced from the International Finance Corporation’s loan worth VND300 billion. However, the bank admitted that the loaning has been going slowly as clients cannot afford high interest rates.
According to the HCM City Branch of the State Bank of Vietnam (SBV), the real estate credit growth rate of the banks in the city has decreased from 19% at the beginning of the year to 11% now.
Ho Huu Hanh, Director of SBV’s HCM City branch, said that lending interest rates may decrease in the time to come as the consumer price index (CPI) increases have been slowing down in the last two months. The CPI increase was 0.18% only in September, the lowest increase so far this year. Hanh said that the interest rate decreases will make it more feasible for people to access bank loans.
Sacombank has said it is considering lowering lending interest rates in order to ease the burden on clients who really need to borrow money to buy or repair houses.