The central bank yesterday announced it would impose stricter credit-tightening measures on luxury housing loans to curb property speculation in the greater Taipei area and maintain financial stability.
At the same time, the central bank decided to keep its benchmark interest rates unchanged as expected, the fourth consecutive quarter that the bank has left its policy rates unchanged.
“We decided to expand selective credit controls, because some banks’ loan-to-value ratios to applicants have been found to be too high, with interests rates too low,” central bank Governor Perng Fai-nan (彭淮南) told a media briefing after the bank’s quarterly boarding meeting yesterday.
That might raise risks of a deterioration in banks’ assets, affecting domestic financial stability and further dragging down the real economy, Perng added.
Perng said most domestic commercial banks have been strengthening controls themselves since the monetary authorities voiced concerns in April.
Still, the central bank’s board yesterday decided to establish a consistent standard for domestic lenders to follow.
The bank asked lenders to lower housing loans to 60 percent of a house’s value for properties worth more than NT$80 million (US$2.68 million) in the greater Taipei area and for luxury houses costing more than NT$50 million in other areas, effective today.
Sinyi Realty Inc (信義房屋) said the central bank’s new selective credit control measures would not have a major impact on the general housing market because transactions on luxury properties account for only 3 percent or less of all transactions in the greater Taipei area.
Last year, loan-to-value ratios for some high-priced properties reached between 80 and 97 percent, higher than an average of 71 percent ratio recorded for general applicants, the central bank said in a press release.
Meanwhile, the lowest interest rates on housing loans for these luxury properties amounted to 1.84 percent, lower than an average of 1.91 percent paid by general applicants, the release said.
Following the central bank’s latest decision on policy rates, the bank’s discount rate will remain at 1.875 percent, while the collateralized loan rate and unsecured loan rate held at 2.25 percent and 4.125 percent respectively.
The bank attributed the decision to the still-high downside risk for the global economy, and slowing inflationary pressure in Taiwan following the government’s recent decision to raise electricity prices in three stages, which is an issue the bank is monitoring closely.
Keeping policy rates unchanged will help stabilize consumer prices and the financial system, Perng said.