What should borrowers do when interest rates trend up?

Hanoi (VNA) – Several major banks have cut lending rates to offer timely support to customers, which is described as a positive sign, especially at the end of the year when the demand for loans increases.

Making transactions at BIDV (Photo: VietnamPlus)

At the end of the year, banks start a race to attract capital, resulting in an increase in deposit rates. As a result, lending rates also move up.

Borrowers concerned over interest rates

Since early July, many banks have set long-term deposit rates at over 8 percent per year. Short-term rates have also been adjusted up. In recent months, dozens of banks have also pushed five-month rates to about 5.5 percent, leading to growing lending rates, thus affecting borrowers' plans.

Experts forecast that given the current trend, it is unlikely that banks will cut lending rates in the near future, especially during the year-end when many banks are about to run out of "credit" rooms for the whole year. When businesses have to borrow medium- and long-term loans from commercial banks with rates from 12-14 percent, exclusive of fees as regulated, it is difficult for individual customers to access loans at lower rates.

Nhu Phuong, a small merchant at Cho Lon, Ho Chi Minh City, said: “Lunar New Year will come soon, so from now on, we have to raise capital for stockpiling. However, after deducting labour, space and warehouse costs, the remaining profit is about 10-15 percent. If the rate is over 10 percent per year, we have to reconsider before investing due to fear of risks.”

Sharing the view, Viet Hau, a customer who is considering loan packages to prepare for home repair, said: “My wife and I tried very hard to afford a small house in Nam Tu Liem district, Hanoi. In order to have money for home repairs, I could only rely on bank consumption loans. However, high interest rates and complicated procedures discouraged me.”

The capital market for housing loans is in the same situation. Due to concern over risks for the economy when credits strongly flow into real estate, the State management agencies have outlined a roadmap for managing home loans this year.

Y Thao, a dealer at a real estate trading floor, said her customers are very concerned about housing lending rates in the coming time, especially for those wishing to buy homes worth over 3 billion VND (130,400 USD). Sellers, buyers and brokers must calculate thoroughly if interest rates hike.

Bucking the trend

Despite growing interest rates, there are some silver linings in the cloud. While many banks still maintain high lending rates which are forecast to continue rising in the near future, the "big four" banks, namely BIDV, Vietcombank, Agribank and VietinBank, unexpectedly announced a reduction in the ceiling interest rates on August 1.

The BIDV lowered the ceiling interest rate to 5.5 percent each year for a number of priority customers and launched many preferential packages for individuals who borrow money for production, trade, home and vehicles purchase. The move is a positive sign to offer timely support for customers, especially at the end of the year when the demand for loans grows.

Along with lowering the ceiling interest rates, BIDV also launched many preferential loan packages with attractive interest rates for individual customers. Specifically, those wishing for medium- and long-term housing loans will enjoy rates from 7.3 percent a year in the first six months starting from the first disbursement time, or from 7.8 percent per year within the first 12 months starting from the first disbursement time.

The preferential loan package applies to loans from 36 months. Customers who borrow to buy automobiles, boost trade and production are also eligible for it.

Thao said she got to know BIDV's loan package at its website www.bidv.com.vn and called the hotline 19009247 for specific advices. According to her, customers will have a great advantage to own homes before the real estate price hike near the Lunar New Year if they access this package, which is also necessary for automobile buyers, merchants and producers./.