The central bank yesterday kept its interest rates unchanged for the seventh consecutive quarter, but tightened lending terms for mortgages for unsold houses, land financing and individuals owning three homes.
The discount and accommodations with collateral rates are to stay at 1.125 and 1.50 percent respectively, while the rate on accommodations without collateral would remain at 3.375 percent, it said.
The monetary policymaker raised its forecast for GDP growth from 5.75 percent to 6.03 percent this year and predicted 4.03 percent growth for next year, but added that an uneven recovery and lingering economic uncertainty warrant a policy hold.
Photo: CNA
“The robust economic performance does not extend to domestic service sectors, and small and medium-sized enterprises,” central bank Governor Yang Chin-long (楊金龍) told a media briefing in Taipei after the bank’s quarterly board meeting.
If the sectors also recover and inflation deteriorates, the central bank would increase interest rates by 25 basis points to the levels before the COVID-19 pandemic began early last year, Yang said.
Yang cautioned property owners, especially young first-home buyers, to avoid overleveraging, as the central bank would move toward monetary normalization next year.
Taiwan’s inflationary pressures are transient in nature, Yang said, pointing at low comparison bases last year.
“Taiwan has balanced supply and demand for most products, unlike the US, where port congestion has caused supply chain disruptions and pushed up consumer prices,” Yang said.
The inflation rate would ease to 1.59 percent next year, from an estimated 1.97 percent this year, Yang said.
However, housing prices would continue to increase amid developers’ upbeat sentiment, excess global liquidity and companies returning from abroad, Yang said.
To facilitate a soft landing, the central bank would, effective today, lower the loan-to-value (LTV) ratio for third-home mortgages by individuals from 55 percent to 40 percent, Yang said.
The LTV ratio for unsold houses would drop from 50 percent to 40 percent, while the land financing LTV ratio would fall from 60 percent to 50 percent, with 10 percent to be withheld until the start of construction, he said.
Land loan borrowers would also need to sign a document containing the details of and schedule for the planned development, Yang said, adding that he is planning to discuss standard terms with lenders to create a level playing field.
The past two rounds of credit controls aimed to prevent funds from overflowing to the property market, rather than to reverse property prices, Yang said.
“They will prove helpful in the long run,” he said.
Andy Huang (黃舒衛), a researcher at property consultancy Knight Frank Taiwan, said that the latest credit controls would weigh on property investors who have to produce more capital and wait longer to generate a profit.
If coupled with the Ministry of the Interior’s plan to set up stricter requirements on presale project transfers, investors would flee the market, Huang said.
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