The central bank’s proposal to tighten mortgage terms could affect home buyers, as they would need to borrow less money if they cannot shoulder higher mortgage burdens, analysts said yesterday.
Central bank Governor Yang Chin-long (楊金龍) told lawmakers on Thursday that there is still room for selective credit controls to cool the housing market, especially in areas with sharp price surges.
Policy tools under consideration include shortening mortgage payment plans and lowering loan-to-value ratios for second-home financing, Yang said, adding that shorter mortgages would prompt borrowers to be more cautious in planning their finances.
Sinyi Realty Inc (信義房屋), Taiwan’s only listed broker, yesterday said the monetary policymaker could cap mortgage terms at 20 years, which would make home ownership more expensive.
As housing prices have risen significantly in the past few years, a increasing number of home buyers are opting for 30-year mortgage payment plans, rather than the standard 20 years, allowing them more flexibility to purchase expensive property, Sinyi research manager Tseng Ching-der (曾進德) said.
People with a monthly salary of NT$60,000 (US$2,013) could take out mortgages of NT$10 million on 20-year payment plans, but could raise the borrowed amount to NT$13.92 million on 30-year schemes, Tseng said, adding that mortgage payments on either plan would be about NT$48,700 per month based on an interest rate of 1.6 percent.
Mortgage periods averaged 23.9 years for homeowners in the third quarter of last year, with about 40 percent opting for 30-year plans, Tseng said, citing government data.
Unfavorable terms would hit people with lower incomes the hardest, noticeably young home buyers who have less financial headroom, Tseng said.
Tseng said that central bank adjustments to mortgage policy have eased the burdens of first-home buyers and urban renewal projects during four previous waves of credit controls.
Senior housing analyst Lee Tung-rong (李同榮) said that stricter mortgage terms would sink the housing market into a collapse instead of a soft landing.
Thirty-year mortgages are popular among young first-home buyers, and tighter lending terms would hurt them the most, he said, adding that the lenders would suffer and the consequences would be unimaginable in a situation of default.
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