The central bank freezes interest rates for 10 consecutive days! Housing market deregulation: second home loan ratio raised to 70%

The Central Bank held a meeting of governors and supervisors today. The governors agreed to keep the current policy interest rate unchanged at 2% and "freeze it for 10 consecutive years." They also relaxed credit control measures in the housing market again, raising the loan percentage for second households from 60% to 70%. They also deleted the requirement that land purchase loans be "tied to the commencement of construction within a certain period" and returned to bank credit practices.

The central bank stated that the main reason for keeping the interest rate unchanged is that domestic inflation is still controllable and is expected to drop below 2% next year, as well as the domestic economy is expected to grow steadily. In order to prudently respond to the uncertainty of the global economic and financial outlook, and the possible impact of the conflict in the Middle East on domestic prices and the economy, the Board of Directors of the Bank believes that maintaining the policy interest rate unchanged this time will contribute to the steady development of the overall economy and finance.

The central bank's rediscount rate, guaranteed loan financing rate and short-term financing rate maintain annual interest rates of 2%, 2.375% and 4.25% respectively.

In addition, since the central bank adjusted the upper limit of second home purchase loans for natural persons nationwide in March, as banks continue to strengthen real estate credit risk control, the excessive flow of credit resources to the real estate market continues to improve. At the end of July, all banks’ real estate loans accounted for the total loan ratio (real estate loans). The loan concentration ratio) has dropped to 34.44%; the ratio of home purchase loans issued by the National Bank to people who do not own their own homes continues to increase, and the ratio of urban reconstruction loans to construction loans is also rising; real estate market transactions continue to cool down and speculation decreases, and people's bullish expectations for housing prices have slowed down.

Considering that the effectiveness of selective credit control continues to show, and that financial institutions have achieved certain results in strengthening real estate credit risk control, the central bank decided to appropriately adjust relevant credit control measures.

Including to further assist the second household of natural persons to obtain a loan to support their family members or to purchase a house for themselves to live in, the maximum percentage limit of the loan for the second household of natural persons to purchase a house has been adjusted from 60% to 70%.

In addition, since the central bank stipulated that land purchase loans should be tied to the start of construction within a certain period in December 2021, banks have handled relevant cases prudently, and verified and determined the timetable for the start of construction on a case-by-case basis; the relevant regulations should be returned to banks' handling of credit practices, and the requirement that land purchase loans be "tied to the start of construction within a certain period" has been deleted.

The central bank stated that it will continue to review the content of credit control measures on a rolling basis and make timely adjustments in the future to promote financial stability and improve banking business.