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New mortgage rates in Taiwan hit eight-year low

Staff Writer |
The average interest rate of new housing loans extended by the five major mortgage providers in Taiwan last month dropped to an eight-year low, as banks competed with each other to offer cheaper loans.

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The average mortgage rate of the five — Bank of Taiwan, Land Bank of Taiwan, Taiwan Cooperative Bank, Hua Nan Commercial Bank and First Commercial Bank — dipped to 1.624 percent, 0.003 percentage points lower than the 1.627 percent in May, data released by the central bank on Friday last week showed.

It was the lowest since May 2010, when the figure reached 1.616 percent, the data showed.

The five banks’ data are used to gauge the overall health of the nation’s property market, as their combined loans account for about 40 percent of the total mortgages extended by local lenders.

Housing loans by the five last month dropped 7.86 percent month-on-month and 11.55 percent year-on-year to NT$41.34 billion ($1.35 billion).

The central bank said the decline reflected the decrease of housing deals in the nation’s six special municipalities, which fell 8.1 percent month-on-month and 7.9 percent year-on-year to 18,744 units.

In the first six months of the year, the five banks’ mortgage loans totaled NT$241.23 billion, up 17.36 percent from a year ago, the central bank’s data showed, while housing deals in the six municipalities increased 5 percent year-on-year to 103,374 units, local governments’ tallies showed.

Mortgage rates are primarily tied to short-term rates, which have been kept unchanged by the central bank since September 2016.

At a news conference on June 21, after the bank’s quarterly board meeting, central bank Governor Yang Chin-long did not say when the interest rates would rise, but he reminded homeowners to ensure that their funds are adequate if interest rates were to rise.

In other developments, local banks in May pushed their foreign currency lending to a record-high level, as such loans bore higher yields than local currency loan yields, central bank statistics showed.

Outstanding foreign currency loans of all banks in Taiwan totaled NT$1.038 trillion in May, up NT$70 billion from April.

That included NT$671.14 billion extended by Taiwanese banks and NT$367.17 billion by foreign lenders, the data showed.

As of the end of the first quarter, foreign currency interest spread stood at more than 2 percent amid the US Federal Reserve’s interest rate hike cycle.

The interest spread in New Taiwan dollar terms was lower than 1.4 percent, as the central bank continued to stay put and competition remained fierce in the banking sector.

Mega International Commercial Bank, the banking arm of state-run Mega Financial Holding Co, would benefit the most among local banks from the Fed’s continued interest rate hikes because its foreign currency loans accounted for 35 percent of total loans in the first quarter.

That was higher than most of its local rivals, which reported up to 15 percent of their loan books as foreign currency loans, market watchers said.


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