DEPOSITS INTEREST REDUCED BY 2.5 - 3%/YEAR
In early October 2022, Ms. Nguyen Thi Thanh (living in District 10, Ho Chi Minh City) deposited 1 billion VND in savings for 6 months with an interest rate of 7.2%/year at BV Bank. At that time, this interest rate was very attractive. However, by the end of November and early December, banks were competing, and the market saw rates of 8%/year and 9%/year, causing many customers to hesitate.
Ms. Thanh also hesitated between withdrawing early, accepting to lose the interest she had deposited before and then depositing it again to get a higher interest rate. Before she could decide, in January 2023, the hot interest rate market appeared with rates of 11 - 13%/year, making Ms. Thanh regret it. In early April, the old book expired and opening a new book was also the time when the savings interest rate turned around. The bank staff informed Ms. Thanh that the interest rate was only 7.7%/year (instead of 8.6%/year the previous month) for the 6-month term, and 5.5%/year for the 1-month term.
Banks need to reduce lending rates
Recently, this bank has mobilized VND for a 6-month term down to 7.2 - 7.4%/year, 1-month down to 5%/year. Ms. Quynh, Head of BV Bank's transaction office, also admitted to being "dizzy" with the current sharp decrease in mobilization interest rates. Bank employees in charge of mobilization "cry and laugh" because a few months ago, interest rates increased rapidly, many customers wanted to switch to other banks. Now, interest rates are falling rapidly, customers also intend to transfer money to other places with higher interest rates.
Since the State Bank of Vietnam (SBV) reduced the ceiling interest rate for VND deposits by 0.5% per year from May 25, the average interest rate for VND deposits in the market has decreased at a faster rate. The highest interest rate on the market today for terms under 6 months is 4-5% per year, most banks have reached the ceiling of 5% per year. For terms of 6 months or more, interest rates range from 5.5-7.8% per year, for terms of 12 months, interest rates are from 6.8-8.6% per year. Even SCB, which previously had one of the highest interest rates in the market, has dropped sharply to 7.8% per year, the highest for terms of 12 months. Some banks currently have high interest rates such as VRB at 8.9% per year for terms of 24 months or more; BacABank at 8.4%/year from 18 months and up; PVcomBank mobilizes 8.3%/year from 18 months and up...
In recent weeks, banks have continuously adjusted their deposit interest rates, at least 1-2 times, in some places up 3-5 times, each time from 0.2-0.5%/year. In May alone, banks' VND deposit interest rates decreased by about 1%, increasing the interest rate reduction compared to the end of 2022 to 1-3%/year. The deposit interest rate of 9-13%/year disappeared.
In particular, the market has seen long-term terms with lower interest rates than short-term terms. For example, TPBank mobilized 6-month terms at 7.6%/year, 12-month terms at 7.7%/year, but for 36-month terms it was only 7.3%/year. OCB mobilized VND for 6-month terms at 8%/year, 12-month terms at 8.1%/year, but for 36-month terms it was only 7.9%/year... This shows that the trend of long-term interest rates is expected to decrease by banks, so they adjusted downwards for long-term mobilization terms.
Interest rates drop by the drop
According to SSI Securities Corporation, while the mobilization interest rate has decreased by 2.5 - 3%/year compared to the beginning of the year, the adjustment of home purchase interest rate has not been much. In fact, many individuals and businesses are still bearing high interest rates, especially old debts.
Reader H.Linh reported to Thanh Nien Newspaper about the "sky-high" interest rate for loan applications. Specifically, according to Ms. H.Linh, she took out a loan to buy a house in 2019, the loan principal is paid in 10 years, interest is paid monthly. The current interest rate Ms. Linh is paying is 17%/year. "When I met the bank, they said the interest rate would be adjusted every 6 months, so my loan will not be adjusted until the end of the third quarter of 2023. Before that, I had to pay interest rates of 11.85%, 14%, 16.2% for 2020, 2021, 2022, respectively. Savings interest rates have decreased but loans still have to wait, so customers are at a great disadvantage," said Ms. H.Linh.
As an export enterprise with large revenue, Mr. Vu Thai Son, General Director of Long Son Joint Stock Company, admitted that he did not dare to borrow VND because he was afraid of high interest rates when banks reported VND loan interest rates of 9-13%/year. "This interest rate is higher than the profit from cashew nut trading, so the company did not borrow VND. The company has foreign currency from exports to pay off debts, so we borrowed USD with interest rates of 5-6.5%/year. The USD loan interest rates of domestic banks are currently equivalent to those of some countries. However, because the domestic USD savings mobilization interest rate is maintained at 0% (anti-dollarization policy), the loan interest rate of 5-6.5%/year is also relatively high. Meanwhile, in the US, the mobilization rate is 4%/year, and the lending rate is about 6-7%/year," Mr. Son compared.
A survey of loan interest rates of some banks shows that the current lending interest rates have decreased compared to the beginning of the year, but quite slowly. Ms. Hang (BIDV employee) advised customers to borrow to buy a house with an interest rate in the first 12 months from 9.2 - 10.2%/year. By the end of this preferential period, the loan interest rate will be calculated by the 12-month mobilization interest rate plus a margin of 4% (BIDV's current 12-month mobilization interest rate is 6.8% + 4% = 10.8%/year). Mr. Hoa ( SHB employee) said that the bank's current home loan interest rate is 14.6%/year applied in the first 3 months of the loan. The interest rate will then float according to the current base interest rate formula of 11.3% plus a margin of 3.3 - 3.5% (equivalent to a loan interest rate of 14.6 - 14.8%/year). Business borrowers have an interest rate of 10%/year for the first 6 months of the loan, the following 6 months will be calculated according to the base interest rate of 11.3% plus a margin of 1.5 - 2.3% (equivalent to 12.8 - 13.6%/year).
At a Government press conference in early June, the State Bank of Vietnam said that the average lending interest rate for new loans is currently around 9.07% per year, down 0.9% compared to the end of last year.
Mr. Nguyen Huu Huan, Head of the Finance Department at Ho Chi Minh City University of Economics, said that the 9%/year loan interest rate only focuses on large borrowers, while whether small businesses and people can borrow at this rate or not is a question that needs to be answered.
"The State Bank of Vietnam did not give a specific lending interest rate from how much to how much, but this reduction is lower than the downward trend of mobilization interest rates. In addition, new lending interest rates of some banks apply preferential interest rates in the initial period, from 3, 6 or 12 months at the level of 8 - 10%/year, but then the floating interest rate skyrockets by a few percent compared to the initial lending interest rate," Mr. Huan commented.
SSI Securities Company analyzed: With the current home loan interest rate fluctuating around 13%, it is necessary to cut this interest rate by 1.5 - 2%/year to stimulate demand in the real estate market and this is very likely to happen in 2024. Contrary to monetary policies in countries around the world, Vietnamese banks can consider further cuts in lending interest rates to stimulate credit demand in the second quarter of 2023. The current NIM ratio of banks is between 2.7 - 6.2%.
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