Cheap money still flows slowly

Consumer loan interest rates down

Since the beginning of the year, banks have accelerated programs to increase credit growth, specifically reducing lending interest rates to the lowest level in the past 20 years. Bao Viet Commercial Joint Stock Bank (BVBank) has just launched a loan package for buying and repairing real estate, personal consumption, and adding capital for production and business... with interest rates from 5%/year. At the same time, the lending interest rate adjustment margin between fixed and floating interest rates has decreased to only 2%/year. ShinhanBank has reduced housing loan interest rates from 0.3 - 0.7%/year compared to the fourth quarter of 2023. Borrowers can choose to borrow at an interest rate of 6.8%/year fixed for the first 12 months, or 7.4%/year fixed for the first 24 months, or 8%/year fixed for 36 months...

Vietcombank reduces savings interest rates to 1.7%/year

The group of state-owned banks has also reduced lending interest rates by 1 - 1.5% compared to the end of last year. BIDV's lending interest rate is currently around 6.5%/year; VietinBank is at 6.4%/year; Vietcombank is at 6.7%/year fixed for the first 18 months of the loan, and if fixed for 2 years it is 6.8%/year; Agribank is at 7%/year with a preferential rate of 12 - 24 months... After the preferential period, the lending interest rate will float, calculated by the 12-month savings interest rate plus a margin of 3.5%.

The current interest rate for home loans and consumer loans in the market is 1-2%/year higher than the interest rate mobilized by banks. The interest rate for home loans fluctuates between 5-10.5%/year and is considered the lowest level in the past 20 years. Leaders of some banks admit that many preferential loan interest rate packages in the first months almost break even compared to the mobilization. However, disbursement is still not easy because the demand for real estate loans is not high.

According to the Banking Association, the State Bank has assigned credit targets to banks from the beginning of the year so that banks can be proactive in providing credit to the economy . However, whether credit growth is achieved or not depends on the capital absorption capacity of the entire economy. Particularly for the consumer lending sector, interest rates are currently at their lowest level ever, but banks and finance companies will consider lending in the context of many difficulties. Consumer credit accounts for about 21.2% of the total outstanding loans to the economy, about 2.5 million billion VND. In 2023, consumer credit growth will be at its lowest level in 5 years.

There needs to be a solution for medium and long-term capital mobilization of banks to solve this problem.

Financial expert, Dr. Nguyen Tri Hieu

Supply and demand for consumer loans have not met yet.

Interest rates are rarely as low as they are now, but market liquidity is even lower. Economic difficulties and lack of sources of repayment; concerns about interest rates being adjusted; concerns about the real estate market still being frozen... make home buyers hesitate.

Mr. Nguyen Trung (District 2, Ho Chi Minh City) is looking for a house near his company for work convenience. Hearing about the decrease in real estate prices, he took the opportunity to search everywhere. But after 2 months, Mr. Trung commented that there are many options at this time when market liquidity is not high. However, real estate prices in some areas have not decreased much.

"Recently, my family chose a house in District 10, worth more than 12 billion VND. If we buy this house, we will have to borrow more than 2 billion VND from the bank. Through the advice of the bank staff, if we calculate the preferential loan interest rate of about 7%/year in the beginning, the first months of payment will be nearly 50 million VND in principal and interest. After the preferential period, the interest rate will be calculated according to the base interest rate plus a margin of 3 - 5%.

This is what I worry about the most because at the end of 2022 and the beginning of 2023, the mobilization interest rates of banks will skyrocket, leading to loan interest rates also increasing to 15 - 16%/year. Many customers are in trouble because they cannot pay interest. The preferential interest rates that banks give to customers are only for a few months, up to 1 - 2 years at most, and then floating, so borrowers cannot calculate what the following years will be like, especially home loans with terms of 10 - 25 years," Mr. Trung explained.

This is also the mood of many people. Want to borrow but afraid.

Financial expert, Dr. Nguyen Tri Hieu also said that this is a problem of the Vietnamese market. Banks lend for 10, 20, 30 years but the interest rate is only preferential for the first few months, then floating and the risk of interest rate skyrocketing in the following period is very high, sometimes even doubling. At this time, borrowers have to pay quite high interest, making debt repayment a burden in life. In the US, home buyers can pay a fixed interest rate for 30 years or even longer. "There needs to be a solution for medium and long-term capital mobilization of banks to solve this problem," Mr. Hieu said.

Mr. Nguyen Quoc Hung, General Secretary of the Banking Association, said that banks have excess capital and abundant credit room, but consumer lending will face many difficulties this year. That is, there is no demand for loans. Previously, the real estate market had good liquidity, many people bought and sold quickly to make a profit. In case they did not sell, they could rent. However, the current situation has completely changed, the liquidity of the real estate market is low, renting houses is difficult, prices are falling... leading to low real estate transactions, and demand for loans is also going down.

"Now that banks have reduced interest rates, real estate companies should also calculate to make housing prices more reasonable. In addition, to stimulate consumer loans, people must have income, while currently, people not only in the country but also around the world are saving on spending. Another reason is that the bad debt ratio is high, up to 4%, so banks as well as financial companies consider a lot before deciding to lend. Lenders will also look at the customer's source of debt repayment before lending, not afraid of increasing bad debt. Debt collection by banks is facing many difficulties, especially the situation of "defaulting on debt" in consumer loans, which also makes banks hesitate in lending," Mr. Hung stated the current situation.

Cheap capital is still unsaleable for reasons like that.

Savings interest rates down

Banks continued to reduce savings interest rates in the first days of January, down to the lowest level in the past 20 years. On January 12, the Joint Stock Commercial Bank for Foreign Trade (VCB) reduced its deposit interest rate by 0.1 - 0.2% compared to before, down to the lowest level in the market, at 1.7%/year. For 1-2 month terms, this bank's deposit interest rate decreased from 1.9%/year to 1.7%/year; for 3 month terms, it also decreased by 0.2% to 2%/year; for 6-9 month terms, it decreased from 3.2%/year to 3%/year; for 12 month terms, it decreased to 4.7%.

Similarly, Viet A Commercial Joint Stock Bank (Viet A Bank) has just reduced interest rates from 1-5 months to 4.2%/year, 6-11 month term is 5.2%/year and 12 month term is 5.5%/year. In the past 2 weeks, more than 10 banks have reduced deposit interest rates and the 6%/year level is quite rare. Although the savings interest rate has hit rock bottom, the amount of savings deposits is still pouring into banks. According to the State Bank, the amount of deposits into the banking system in 2023 will reach an all-time high of more than 13.5 million billion VND by the end of 2023, an increase of 14% compared to 2022.

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