The central bank yesterday affirmed its authority over credit controls and mortgage operations, saying that they fall within its jurisdiction to help maintain the nation’s financial stability and strengthen the health of the housing market.
The central bank made the assertions in a statement to fend off charges by Wu Tong-hsiung (吳統雄), chief accounting advisor of Taishin Financial Holding Co (台新金控), that mortgage restrictions imposed last year make it difficult for the public to own their homes, while failing to deter property speculation.
“The central bank is empowered by the nation’s banking laws to regulate mortgage loans and credit controls,” the monetary policymaker said after the Chinese-language China Times (中時) ran Wu’s commentary challenging its role in moderating the housing sector.
At issue are requirements that limit second-home financing to 60 percent of property values and cancellation of grace periods for debt repayment in selective districts of New Taipei City and the whole of Taipei City, where concerns over housing bubbles have been building.
Wu, a former Taishin Financial board supervisor, said that in practice the restrictions prevent people from moving to a larger house or to different locations when they change employer or when their children reach school age.
“Relocations are becoming increasingly difficult, if not impossible, because few can come up with a 40 percent down payment while carrying heavy mortgage payments at the same time,” the veteran accountant said.
Relocations used to be feasible only because lenders allowed new mortgage applicants a two-year period during which time borrowers only needed to pay interest charges, Wu said.
As it can take months to renovate and decorate a new home, many people buy a new house well before selling their existing one, with the grace period serving as a critical buffer in their debt repayments, Wu said.
The bank’s credit controls have very little impact on property speculators because they tend to have deeper pockets, he said.
Wu called on the central bank to immediately scrap tightening measures that fail to help the housing market or help social mobility.
“Nothing short of tax reforms can narrow income gaps,” he said. “It is also improper for the central bank to intervene in housing policies.”
The central bank defended the credit controls that it insisted come with supporting measures.
Households can circumvent second-home financing restrictions by using different family members as mortgage applicants, the central bank said.
Mortgage applicants for presale projects can enjoy similar relief if they settle existing mortgage payments before taking on new home loans, the central bank said.
It takes about two years or longer for developers to complete construction on presale home projects.
The central bank said it will provide extra help for special cases if necessary, its statement said.