Under Circular 19, released by the State Bank of Vietnam (SBV), the central bank asks commercial banks to reduce the maximum ratio of short-term funds used for medium- and long-term loans to 40% this year and to maintain credit growth at a low 14%. The Circular 19 is aimed to revise and supplement some articles of Circular 36, providing safety limits for the banking sector to prevent bad debts. In addition, SBV also requests commercial banks to prioritize loans for production and business activities rather than risky sectors like securities and real estate.
Potential buyers at a condo project in District 7, HCMC. (Photo: Tan Thanh)
Nguyen Nhung, who is now living in Ho Chi Minh City’s Thu Duc District, says she has just borrowed VND1 billion for a period of over 10 years, at annual interest rate of 7 percent for her new apartment. She worries that the interest rate would be amended upward soon.
She says along with the hike in interest rates, banks also more strictly tighten regulations on loans, preventing borrowers from using their loans for other purposes.
According to director of a HCMC-based commercial bank, the high risk coefficient rate imposed on the property sector was 200%, making commercial banks not focus on the sector and affecting people who needed loans to finance their home purchases.
The housing market will be under control, and house prices will be stabilized in return for limits on funds injected into the property sector and tight control over credit growth at low rates.
However, the Vietnam Export Import Bank (Eximbank)’s Deputy Director Nguyen Canh Vinh said the bank did not limit lending to home buyers. Eventhough the interest rates of loans have yet to rise strongly, banks’ tight control over short-term funds for medium- and long-term loans will affect 10- to 20-year borrowers.
Besides, Governor of SBV Le Minh Hung stated the short-term capital for medium- and long-term loans would continue to be adjusted downward to 35%, 30% or even 25% in the coming years in order to balance the market, making home buyers even more concerned about the rise of interest rates.
