Fri, Jun 27, 2014 - Page 13 News List

Central bank to tighten credit

NO EASY MONEY:The central bank added eight more areas in which housing loans are restricted, to maintain financial stability of ROC

By Amy Su  /  Staff reporter

Central bank Governor Perng Fai-nan speaks at a media briefing after the bank’s quarterly boarding meeting in Taipei yesterday, announcing that the bank’s discount rate will remain unchaged at 1.875 percent.

Photo: Wang Yi-sung, Taipei Times

The central bank yesterday announced it will extend credit-tightening measures on housing loans to eight additional areas in New Taipei City and Taoyuan County to maintain financial stability and curb speculative property transactions.

Effective today, local banks have to use prudential measures on housing loans they accept in New Taipei City’s Wugu (五股), Taishan (泰山), Bali (八里) and Yingge (鶯歌) districts, as well as Taoyuan City (桃園), Lujhu City (蘆竹), Jhongli City (中壢) and Gueishan Township (龜山) of Taoyuan County.

“Housing prices in certain areas are relatively high, which may hurt financial stability, lead to income inequality and impact private consumption,” central bank Governor Perng Fai-nan (彭淮南) told a media briefing after the bank’s quarterly boarding meeting.

Other than the newly added eight regions, the central bank has since June 2010 asked lenders to gradually decrease loans to 60 percent of a house’s value for properties located in Taipei and 13 areas in New Taipei City.

Perng said the central bank’s credit control measures have improved the concentration in housing loans and slowed the excessively high property prices in certain areas, making speculative property transactions spill over to nearby regions.

In addition, the central bank found that some real-estate speculators used mortgages to purchase many properties, with housing loans for luxury houses increasing risks for local banks.

That prompted the central bank to ask lenders to decrease loans to house owners to 50 percent of the house’s value for third and subsequent properties nationwide.

Meanwhile, lenders have to decrease loans to 50 percent of a house’s value for properties worth more than NT$70 million (US$2.3 million) in Taipei, NT$60 million in New Taipei City and for luxury houses worth more than NT$40 million in other areas.

For an incorporated company applying for a loan to purchase a residential property, lenders are asked to decrease loans to 50 percent of a house’s value, the central bank said in a statement.

Meanwhile, the central bank decided to keep its benchmark interest rates unchanged as expected, the 12th consecutive quarter that the bank has left its policy rates unchanged.

The bank’s discount rate remains at 1.875 percent, with the collateralized loan rate and the unsecured loan rate at 2.25 percent and 4.125 percent respectively.

Tony Phoo (符銘財), a Taipei-based economist at Standard Chartered Bank, said yesterday that although the central bank decided to stay put this time, the momentum for the bank to adjust its policy interest rates is growing, citing the continuous economic recovery and anticipated inflation.

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