'Struggling' to pay interest on home and car loans

Loan interest rate 17%/year

Ms. Kim Thanh (residing in District 10, Ho Chi Minh City) said that she had just gone to the Vietnam - Russia Joint Venture Bank (VRB) to request information on how to calculate loan interest. Ms. Kim Thanh received a message from the bank informing her that the amount of debt to be paid in early June was more than 24 million VND, not including the fixed principal of more than 20.5 million VND.

Banks need to support further interest rate reduction for individual home buyers

In 2017, Ms. Kim Thanh borrowed 3.7 billion VND from VRB to buy a house. The loan interest rate for the first 3 months is 7.15%/year, and for the next 6 months it is 8.5%/year. After that, the loan interest rate will be equal to the 12-month term deposit interest rate plus a margin of 3.4%, fixed for 3 months and the interest will be calculated once. According to the explanation of this bank's staff, the 12-month term deposit interest rate at March 31 of the bank is 9.7%/year, plus a margin of 3.4%, so the loan interest rate that Ms. Kim Thanh is paying is 13.1%/year.

Ms. Kim Thanh said that at that time she did not pay attention to the bank's mobilization interest rate. Looking back now, she saw that the bank mobilized for a 12-month term at 8.4%/year, so she requested the bank to adjust the interest rate for June down to 11.8%/year. However, the bank staff explained that the loan interest rate of 13.1%/year would be maintained for 3 months, so she had to wait until the beginning of July to adjust it down according to the new mobilization interest rate.

"For more than 5 years, I have never paid interest late by a day. However, I have never seen the bank calculate anything beneficial for the customer. Compared to the initial interest rate, the current interest rate has doubled. The principal is paid 35% but the interest is still the same as at the time of borrowing. From the time of borrowing until now, I have paid the bank 1.5 billion VND in principal, and the interest has also been paid to the bank corresponding to this amount. However, now the bank has reduced the mobilization interest rate but still refuses to reduce the loan interest rate," Ms. Thanh was upset.

Two days ago, Ms. Kim Thanh went to the bank to pay off a loan of more than 700 million VND in advance and witnessed several customers also paying off their loans in advance because the interest rate was too high. There was a case of paying off 400 million VND in advance, paying an additional early repayment fee of more than 4 million VND.

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Not only the old interest rates but also the new contracts for individuals borrowing to buy houses and cars also have high interest rates. Ms. NH (residing in Binh Thanh District, Ho Chi Minh City) was advised by Vietinbank staff that the interest rate for car loans in the first year is from 10 - 10.3%/year, in case of fixed interest rate for 2 years, the interest rate is 10.7%/year, then floating interest rate is 12.5%/year. Survey of interest rates of some banks lending to buy houses and cars has quite high interest rates. On June 1, VIB announced the new base interest rate, accordingly, the interest rate for real estate loans disbursed in 2023 is 10.5%/year, from 2019 - 2022 is 11.5% and disbursed before 2019 is 12%. For auto loans, the base interest rate disbursed from 2023 is 10.9%, from 2019 - 2022 is 11.9% and disbursed before 2019 is 12%. This base interest rate plus the margin of each contract will give the loan interest.

Ms. ND ( TPBank credit officer) said that the current interest rate for home loans is 12%/year, for car loans is 12.5%/year. The interest rate for home loans is fixed for 12 months, then it will be recalculated based on the base interest rate (announced by the Bank) plus a margin of 2.5%. In the case of consumer loans, the Bank lends at an interest rate of 16%/year. These loans require collateral. MSB credit officer named PL informed that the Bank's current mortgage interest rate is 12.04%/year, and unsecured loans are 17%/year.

Not only the above banks but many banks are also applying high interest rates for home and car loans, ranging from 10.5 - 15%/year. Some banks offer preferential loan interest rates of 7 - 8%/year, but also have a short term to attract customers and then have to bear soaring floating interest rates. Usually, home purchase contracts have long terms of 10 - 30 years, so many customers ignore information on how to calculate interest after the preferential period. As a result, when interest rates on the market increase, it will create great pressure, affecting the ability to repay debt.

Bank "eat thick"?

Compared to the beginning of the year, the interest rate for VND deposits of banks has continuously decreased, but as mentioned above, many customers who borrow to buy houses, buy cars, consume... "stand still" with high interest rates. The current interest rate for VND deposits of banks with terms of less than 6 months is from 4 - 5%/year, from 6 - 12 months is about 6 - 8.5%/year. However, the current interest rate for loans to buy houses, repair houses, cars, and consume is 40 - 100% higher than the interest rate.

Chairman of the Ho Chi Minh City Real Estate Association (HoREA) Le Hoang Chau said frankly that recently, commercial banks have reduced deposit interest rates quickly, but the loan interest rate for individual customers has decreased slowly and very little, and loan interest rates are still high. Banks have not shared much with customers. The proof is that the 2020-2022 profit statistics of 28 banks increased by an average of 21%, while businesses and individuals are facing many difficulties. The total loan interest rate supported by the banking industry in 2022 at 3,000 billion VND is not much. While banks expect to increase profits by 10% in 2023, businesses, especially borrowers, feel "bitter".

NH published data

The State shows that real estate credit in the first quarter of 2023 is estimated to increase by about 3% compared to the end of 2022. Total outstanding real estate credit by the end of February 2023 is about 2.6 million billion VND, accounting for 21.2% of the total outstanding debt of the economy ; of which housing loans are estimated to account for 67%, real estate business loans account for about 33%.

Mr. Chau suggested that the bank reduce the interest rate for home buyers, currently at 12-13%/year, to a more reasonable level, around 8-9%/year.

According to statistics from the State Bank, about 70% of individuals buy houses in the total outstanding real estate credit. Meanwhile, 4 banks are implementing a 120,000 billion VND package for social housing with an interest rate of 8.2%/year for individuals buying houses. For those who can borrow from this package, the interest rate of 8.2%/year is still very high. As for individuals borrowing to buy houses for investment or business, the loan interest rate is according to the agreement.

"The Association recognizes that creating conditions for home buyers and investors to borrow credit with reasonable interest rates will increase "total demand" and is also a very important solution to create cash flow and increase liquidity of the real estate market, helping real estate businesses overcome current difficulties," Mr. Chau suggested.

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