Interest rates of home loans at commercial banks have tended to reduce significantly since the second half of July due to low capital demand from business and production.

The number of searches for small apartments with an area of about 45 square
metres has been increasing strongly by more than 200% compared to
the previous quarter. (Photo: cafef.vn) 

The home loan interest rates at State-owned banks, including Vietcombank, BIDV and VietinBank were cut by 0.2-1 percentage points per annum for different terms from the end of July 2020.

Specifically, the preferential interest rate at BIDV was lowered from 8% to 7.8% per annum on 12-month terms, from 9% to 8.8% per annum on 24-month terms. By the end of the preferential period, the average lending rate is 10.1% per annum, on a borrowing period of 20 years.

At Vietcombank, home loan interest rates were cut from 8.1% to 7.7% per annum for a preferential term of 12-month. Particularly, Vietcombank provides seven interest rate options so that homebuyers can take the initiative in calculating loan plans.

At foreign-owned banks such as Standard Chartered, UOB, HongleongBank, HSBC and Shinhanbank, the average interest rate of home loan packages is listed at 6.49-8.8% per annum for one- to three-year loans. In the following years, the additional rate is 1.5-3.9% per annum based on the deposit interest rates for terms from six months to two years, fluctuating from 10 to 10.5 percent per annum. The borrowing terms are from 20 to 25 years, thoibaonganhang.vn reported.

For the group of private joint stock banks, Techcombank made the largest interest rate decrease to home loan packages. Accordingly, the bank stimulates home loans with a long term of 35 years with preferential interest rates of only 8.29% per annum in the first year. After the preferential period, loans of more than VND5 billion are offered with an attractive rate of 10.8% per annum.

Other private commercial banks, such as MB, TPBank, VPBank and VIB, also listed 12-month preferential interest rates for home loans at 7.7-10.1% per annum. After the preferential period, the rates will be adjusted to about 11-15% per annum.

According to experts, banks’ interest rate cut for home loans is mainly aimed to boost credit growth targets in the middle of low capital demand for production and business activities due to the impact of the COVID-19 pandemic. The credit growth expanded only 3.45% at the end of July this year.

Besides, banks currently also prefer home loans because they are secured and less risky than loans for business purposes. The sharp interest rate decline to the lowest level in the past ten years is also creating favourable conditions for more people to own home.

However, the current biggest obstacle is that housing prices are still relatively high compared to people’s incomes. Therefore, even when the interest rate level has fallen sharply, it is not enough to encourage people to buy houses.

Thus, if localities, especially big cities like Hanoi and HCM City can boost the supply of small apartments, social housing and commercial housing for low-income people with prices of less than VND2 billion per unit, the home loans will grow strongly in the next one or two years as demand for the housing segments has remained high.

Statistics of many real estate exchanges from early Q2 2020 until now have pointed out that the number of searches for small apartments with an area of about 45 square metres increased strongly by more than 200% compared to the previous quarter.