After receiving approval from the Cabinet, Chunghwa Post Co (中華郵政) yesterday launched its first ever home mortgages, which feature the nation's lowest interest rate of 1.98 percent for the first year.
The low interest rate will give Chunghwa Post solid ammunition in its first battle to compete with banks for a share in the nation's home-mortgage borrowers, the state-owned company said.
Until March next year, home buyers over the age of 20 will be allowed to apply for loans of up to NT$6 million from the postal-service company, with interest rates of 1.98 percent, 2.15 percent and 2.95 percent for the first three years, respectively.
The mortgage's interest rate will float along with that of its two-year time deposit after the fourth year, but is estimated to level around 3.2 percent.
The mortgages are expected to be very attractive, since its interest rates in the first two years are even lower than the government's preferential home loans, which have a 2.5-percent interest rate, while the interest rate on mortgages from other private banks usually range between 2.3 percent and 3.25 percent.
Chunghwa Post plans to grant a total of NT$3 billion in mortgages during the first phase -- part of its NT$100 billion fund that has been approved to be released to property-loan borrowers.
Despite intense competition in the home-loan market, rival commercial banks yesterday said that they do not plan to follow suit, as they believe cutthroat competition would not have a positive effect on their long-term performance or financial health.
They expressed concern over Chunghwa Post's risk-management capability, saying that a poor credit policy could bring in bad loans and hurt the lender's long-term liquidity, according to the local media.
Some banks complained that Chunghwa Post, which has NT$3.3 trillion in savings accounts, has initiated an unfair battle, since the cost of the post company's capital reserves is relatively cheaper.