The central bank’s new credit controls on second-home loans would have a very limited impact on the property market, as local banks generally adopt a cautious approach in dealing with mortgages in light of a weak economy, analysts said.
Moreover, most homeowners likely breathed a sigh of relief after the central bank on Thursday kept interest rates intact, as the previous five rate hikes have raised the mortgage burden to a 14-year high and cooled buying interest, Sinyi Realty Inc (信義房屋) said.
Mortgage rates have gained a cumulative 0.75 percentage points to 2.08 percent — rising above the 2 percent mark for the first time since January 2009 — implying an additional NT$70 billion (US$2.28 billion) in interest expenses as mortgages hit NT$9.4 trillion in April, Sinyi research manager Tseng Ching-der (曾敬德) said.
Photo: Hsu Yi-ping, Taipei Times
The pinch is especially evident for people who bought homes in the past three years, when housing prices spiked across Taiwan on the back of a robust economy and capacity expansions by major tech firms, Tseng said.
Property transactions started to soften in the second half of last year, dampened by interest rate hikes, an economic slowdown and unfavorable policy measures to curb property prices, he said.
Prospective buyers are likely to remain cautious after the central bank renewed credit controls by cutting the loan-to-value ratio from 75 to 70 percent on second-home mortgages in Taipei, New Taipei City, Taoyuan, Taichung, Tainan, Kaohsiung, and Hsinchu city and county, the analyst said.
The eight areas account for up to 80 percent of property transactions nationwide, he said.
The central bank aimed to send a message that “it cares” after putting policy rates on hold, in line with the US Federal Reserve, Tseng said.
Eastern Realty Co (東森房屋) said that the tighter lending terms, while unexpected, are reasonable as housing loans continue to rise despite shrinking transaction volumes.
In particular, second-home mortgages have grown unabated, the central bank said, adding that it is seeking to prevent funds from overflowing to real-estate properties and posing a threat to the financial system’s stability.
Eastern Realty said the lower loan-to-value cap would affect home buyers with relocation needs.
This group will have to set aside more money for down payments when switching houses, the broker said.
State-run Taiwan Cooperative Financial Holding Co (合庫金控) dismissed the worries, saying that lenders have by and large turned conservative about second-home mortgages.
Present loan-to-value ratios stand at 70 percent on average for second homes, the nation’s major mortgage lender said, adding that banks could show flexibility for people with relocation needs.
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