Adjusting interest rates for social housing loans

According to Decree No. 100/2024/ND-CP, from August 1, 2024, the Vietnam Bank for Social Policies (VBSP) will increase the interest rate for loans to buy, hire-purchase social housing, housing for the armed forces; and to build, renovate, and repair houses from 4.8%/year to 6.6%/year. This new interest rate is adjusted to ensure the sustainability of the lending program and reduce the burden on the State budget.

Ms. Nguyen Thi Kieu Vy's family in Kien Hung Ward, Ha Dong District, Hanoi was happy when the People's Credit Fund lent her 600 million VND in preferential loans to buy social housing.

Consider from many angles

The People's Credit Fund is a type of policy bank, operating not for profit.

Decree No. 100/2024/ND-CP, effective from August 1, 2024, detailing a number of articles of the Housing Law on the development and management of social housing, has brought about a series of notable changes related to social housing lending. One of the notable changes is that the lending interest rate is adjusted according to the lending interest rate for poor households prescribed by the Prime Minister in each period. The overdue debt interest rate is also regulated at 130% of the normal lending interest rate. This means that, with the current lending interest rate for poor households at 6.6%/year, the social housing lending interest rate at the Vietnam Bank for Social Policies has increased by 1.8% compared to before.

According to Deputy General Director of the Vietnam Bank for Social Policies Huynh Van Thuan, this lending interest rate has been summarized, evaluated and carefully calculated by competent authorities during the process of drafting the Government 's Decree; the draft Decree has been widely consulted with ministries, branches, localities and people to complete and appraise before submitting to the Government for promulgation according to regulations.

Commenting on the new adjustments, Mr. Nguyen Quoc Hung, General Secretary of the Vietnam Banks Association, said that the approval of the 6.6%/year interest rate was carefully considered to ensure the balance of many factors. He said that this policy needs to be viewed from a stable and long-term perspective, with a loan term of up to 25 years.

According to the report of the Social Policy Bank as of July 31, 2024, after nearly 10 years of implementing social housing loans under the 2014 Housing Law, Decree No. 100/2015/ND-CP, Decree No. 49/2021/ND-CP, the Social Policy Bank has disbursed VND 20,894 billion to more than 49,000 customers, with outstanding loans reaching VND 17,263 billion with nearly 46,000 customers still in debt. The social housing policy credit capital has contributed to helping more than 49,000 low-income people, workers and their families have social housing and contributed to the construction of more than 49,000 houses, stabilizing "settling down and working", ensuring peace of mind in production and economic development.

Consider adjusting to suit the practice

Social housing project in District 2, Ho Chi Minh City

Carefully calculated to maintain the sustainability of the program and reduce the burden on the State budget, some experts also emphasize the need for a stable policy in the long term.

Dr. Nguyen Tri Hieu, an economic expert, assessed that the interest rate of 6.6%/year is relatively attractive, and emphasized that it is necessary to fix this interest rate for many years to create stability for borrowers. Mr. Hieu gave the example of home loan interest rates in the US, where the interest rate can be up to 7.5%/year but is fixed for 30 years, helping borrowers to plan long-term finances without worrying about interest rate fluctuations.

Faced with diverse opinions regarding the adjustment of social housing loan interest rates according to Decree No. 100/2024/ND-CP, Deputy General Director of the Vietnam Bank for Social Policies Huynh Van Thuan affirmed that as the lending implementing unit, the Vietnam Bank for Social Policies will receive opinions to report to relevant ministries and branches, from which to report to the Government and the Prime Minister for consideration and decision. The Vietnam Bank for Social Policies also committed to continue focusing on implementing the social housing loan program to ensure compliance with the Government's regulations in Decree No. 100/2024/ND-CP, including regulations on lending interest rates.

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