Increasing interest rates are forcing homebuyers to make difficult decisions, including selling their homes to pay off their mortgages.
Interest rates on consumer loans have increased by two to four percentage points against early this year to 12-13%, bringing many borrowers to their knees.
Last year, annual interest rates ranged from 7% to 8%, but now it is impossible to take out a loan with an interest rate below 10%, said Pham Anh Khoi, head of the Finance – Economics – Real Estate Institute of Dat Xanh Services.
Tran Nam, a resident of the southern city of Thu Duc, said he is concerned about the high possibility of defaulting on his loan due to a strong spike in interest rates.
To purchase a home, he took a loan with a mortgage rate of 7.9% three years ago. This preferential rate ended a year later and edged up by three percentage points to 11%. However, the rate has shot up to 15% recently.
“The interest rate hikes have made life difficult for my family. Last year, I paid VND10 million a month on my mortgage. The figure has climbed to VND13 million this year, while my income has fallen. Sometimes, I even thought of selling off my home to settle the debt,” Nam said.
Tight monetary policy in other economies, coupled with soaring inflation and local banks have used up their credit growth quotas, has resulted in the recent spikes in interest rates, a commercial bank leader said.
Under the current circumstances, it is difficult for homeowners to sell their homes to pay off their mortgages, as buyers hesitate to take out loans due to high lending rates, further paralyzing the housing market.
Source: Saigon Times