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Rates of home loans likely to stay low in 2011, officials say

Posted on 08:33 PM, January 03, 2011 [ BusinessWorld Online ]
RATES OF HOME loans may remain low this year as market liquidity and demand for property continue, bank officials said.
Teodoro K. Limcaoco, president of BPI Family Savings Bank said in a telephone interview on Thursday that he expects the low interest for home loans to remain next year given market liquidity.
“It depends on market. Interest rate is market driven. If liquidity remains, OFW (overseas Filipino workers) remittances and economy is strong, I don’t see any reason why rates should not go down,” he said.
He said the rates will also likely remain low this year with many developers offering housing products.
Banks, he said have slashed the rates for home loans this year given the low interest environment.
“In general, the environment is a low interest rate environment so home loans will follow. The system is flush with liquidity,” he said.
Data from the BPI Family Savings Bank showed that the bank reduced its interest rate for housing loans in June to 8.75% for one year loans from 9.5%.
Mr. Limcaoco said the bank’s housing loans have risen by 15% over the previous year as a result of the reduced home loans rate.
He declined to say how much loan releases were last year.
Hyacinth M. Galang, Consumer Banking Group Manager China Banking Corp.said in a telephone interview on Tuesday that the bank likewise cut its home loan rate to 7.5% from 8.5% for the first year payment term in July in time for the bank’s 90th anniversary, and as interest rates in the market was low.
She said rates may continue to be low if the low interest rate environment would remain.
“We have no commitment yet of keeping the low housing loan rate. We have to wait for management on the direction, but we may keep the rates if the low interest rate environment persists,” she said.
For his part, Pascual M. Garcia III, Philippine Savings Bank president said in a telephone interview on Tuesday that the rate of home loans will likely remain low only until the early part of 2011 as higher inflation rate will make the central bank raise rates.
“Ultimately, inflation may go up. Fuel as of late has been going up and we are going to see that to go up a little more... If the world economy recovers, it could start to go up and eventually induce BSP (Bangko Sentral ng Pilipinas) to raise rates,” he said.
The market he said, will follow BSP’s lead.
The central bank has kept the overnight borrowing and lending rates at 4% and 6% respectively, since July 2009.
Inflation for November was at 3%, bringing the year-to-date average to 3.8%.
The central bank forecasts inflation for 2010 to reach 3.8%, within its 3.5 to 5.5% full-year target.
Mr. Garcia said the bank reduced the home loan rate by 1% to 8.5% as interest rates tracked lower after the successful conduct of elections.
“After the elections, there was a lot of confidence, more flows coming in and consequently, interest rates started to reverse,” he said.
“Competitive activity was there as rates went down,” he said further.
He said the bank’s releases for home loans was up by 20% from the year ago period as it cut the home loan rate.
He declined to say how much the bank’s loan releases amounted to last year.
Antonio C. Moncupa, Jr. president of East West Banking Corp. said the bank also saw its home loans releases growing by about 15% with the adjustments in the home loan rate.
He said in an email message at the weekend that the bank cut the one-year home loan rate twice last year.
The first adjustment, he said, took place in the first quarter as the bank brought back the one-year home loan rate to 8% from 2008 during the global financial crisis.
The bank, he said, further cut the one-year home loan rate to 7.5% in the second quarter.
“We cut it in response to the general softness in interest rates and more importanly, because we want to build our mortgage portfolio,” he said.
He said rates may rise this year as the world economy recovers.
He said the low and stable interest rates are fueling the mortgage market boom.
“People are more confident with the stability and mortgages are more affordable now than ever,” he said.
For his part, Mr. Garcia said the low rates are also helping the housing boom.
“Low rates are certainly helping the housing boom due to demand,” he said.
He said the housing boom may continue until this year with many investments to the housing sector.
Mr. Limcaoco shared the same view citing that demand for property is on the rise particularly from OFWs.
“There is also a housing backlog so people are looking for housing,” he said.
Mr. Moncupa said that if credit growth is moderate, then the housing boom can last longer.
For her part, Ms. Galang said the housing boom will extend until this year due to demand. -- Louella D. Desiderio
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