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Interest rate cut expected to stimulate demand for home loans

VIETNAM, September 19 - HÀ NỘI — Banks are reducing lending interest rates by 1-3 per cent per year compared to 2022 to stimulate demand for home loans in the wake of the loan decline.

According to a report by the State Bank of Vietnam (SBV), people's demand for home loans and home repairs decreased by 1.12 per cent in the first half of this year, while the loans increased by up to 31 per cent last year.

Banks said they are trying to find borrowers, as after raising capital, they will fall into a capital excess if they fail to lend.

To stimulate demand for home loans, banks are cutting lending interest rates significantly compared to last year.

For example, PVcomBank has recently set aside up to VNĐ15 trillion for preferential loans. Particularly for home buyers, they are offering many different debt repayment options besides allowing a grace period for principal debts to help borrowers reduce the pressure of repaying debt in the early stages of buying a home. The bank’s loan period lasts up to 25 years.

The interest rate of PVcomBank’s loans in the first six months is 9 per cent, or 10 per cent in the first 12 months, Nguyễn Quang Trung, Deputy Director of PVcomBank's personal customer division, said.

Besides, Trung said, there is also a policy of free early repayment after 3-4 years, which will help borrowers to have more options based on their income at that time.

Currently, banks are lending with large limits, from 70-80 per cent of the house value. However, experts also note that home loans are usually long-term loans. Therefore, people should carefully consider the overall financial situation of their family with the loan to be able to repay the debt over a long period of time.

People should choose a bank with a long loan term, Quách Duy Mỹ, Senior Manager of VPBank’s mortgage loan division, said. According to Mỹ, VPBank has a loan term of up to 25 years, which will help reduce the pressure of monthly repayments.

More people are also considering buying houses after banks have cut lending rates. Finding a suitable apartment project while interest rates for home loan decreased by 2 per cent on average against last year, Nguyễn Văn Bộ, a customer in Hà Nội, has recently decided to borrow from a bank to buy a house. He calculated that with the current grace support policy of the bank and the project’s developer, he would have two years without needing to pay the principal and interest on the debt.

Bộ estimated he could accumulate an amount of money during the two years to pay a part of the debt’s principal. — VNS