As for the home purchase market, the increase in loan-to-value ratios for second homes mainly affects natural persons who already have a home loan and are purchasing a second home (data photo)
The Central Bank held a Board of Supervisors meeting today (17th). The policy interest rate remained unchanged, the rediscount rate continued to be 2%, the guaranteed loan financing rate was 2.375%, and the short-term financing rate was 4.25%. The interest rate policy remained unchanged for 10 consecutive quarters. The housing market policy was slightly relaxed. The central bank announced that the upper limit of second-home purchase loans for natural persons would be raised from 60% to 70%. At the same time, restrictions on the start of construction loans were relaxed, and the direction of housing market regulation was adjusted.
The central bank maintained policy interest rates unchanged this time, with the heavy discount rate, guaranteed loan financing rate and short-term financing rate maintained at 2%, 2.375% and 4.25% respectively. The interest rate policy continued to be stable. After the implementation of selective credit controls in the past, the central bank continued to review the real estate loan situation and the effectiveness of the implementation of control measures, and adjusted measures in a timely manner based on the housing market and financial conditions.
This housing market policy adjustment will first focus on natural persons’ second home purchase loans. The upper limit of the loan percentage will be increased from the original 60% to 70%, which is equivalent to returning to the level before the seventh credit control by the central bank in June 2024. At that time, the central bank lowered the loan percentage for second home purchases by natural persons in specific areas from 70% to 60%, which became one of the important measures to control credit in the housing market in recent years.
As for the home purchase market, the increase in the loan-to-value ratio for second homes will mainly affect natural persons who already have a mortgage on one home and are purchasing a second home, especially those who are upgrading their homes and those who want multiple homes. The financial conditions will be looser than in the past. However, the actual loan conditions still need to be evaluated on a case-by-case basis based on the borrower's conditions, collateral and bank credit policies. Not all second-home buyers can directly obtain a 70% loan.
On the other hand, restrictions on the start of construction loans have also been adjusted simultaneously. In the past, when banks undertook relevant construction loans, builders were required to start construction within 18 months. This time, the mandatory closing clause was deleted. Subsequently, banks will decide and set the construction start schedule based on the conditions of the case. The construction industry's restrictions on the use of funds and project promotion schedule have been adjusted.
In recent years, the central bank has continued to use selective credit controls to guide banks to allocate credit resources to home purchases, retirement and real investment, and to reduce the concentration of real estate loans. The central bank previously pointed out that after the implementation of relevant measures, the number of bank restricted loans has dropped, public expectations of rising housing prices have slowed, housing market transactions have cooled, and housing price increases have also slowed.
It is worth noting that this time it is not a complete removal of credit controls in the housing market, but adjustments to some loan regulations. The central bank also stated that it will continue to review the real estate loan situation and the implementation effectiveness of control measures in the future, and review relevant measures on a rolling basis based on changes in the housing market.
