The Taiwanese central bank’s surprise interest rate cut may fail to help housing demand because banks are tightening home mortgage lending, a real estate broker said.
The 0.125 percentage point cut will offer little help in lessening the burden of home buyers, Sinyi Realty Co (信義房屋), Taiwan’s only listed real estate broker, said in an e-mailed statement yesterday.
“Home buyers are not getting any easier time in financing housing payments since banks are standing by their tightening credit stance and not willing to lend more,” Stanley Su (蘇啟榮), senior researcher at Sinyi Realty, said in an interview yesterday. “Banks may even put more scrutiny on borrowers as they face heightened default risk following Lehman Brothers’ bankruptcy.”
The central bank on Thursday unexpectedly reduced interest rates for the first time since 2003, bringing Taiwan’s discount rate on 10-day loans to banks to 3.5 percent, and saying that the global financial crisis had heightened risk of an economic slowdown.
The bank last week reduced the amount for deposits that lenders are required to set aside as reserves and injected funds into the money market.
Taiwan’s central bank joins counterparts in China, Australia and New Zealand in lowering rates this month as share markets tumble and global economic expansion falters.
Central banks globally are trying to ease a credit squeeze as US$523 billion in losses and writedowns tied to a slump in the US mortgage market erode investor confidence and prompt bankers to hoard cash.
Lehman Brothers Holdings Inc filed for the biggest bankruptcy in history on Sept. 15, with more than US$613 billion in debt.
“Taiwan’s housing prices are still overpriced,” Chiang Li-wen, manager of Taiwan Cooperative Bank’s (合作金庫銀行) personal banking unit, said by telephone. “Banks need to be aware of default risks as a result of falling housing prices.”
Taiwan Cooperative Bank, the nation’s biggest bank by number of branches, lowered credit lines last year to owners of studio apartments with an area of less than 15 ping (49.5m²), and the bank has no plan to relax the policy, Chiang said.
Home buyers in Taiwan usually secure 80 percent financing from banks, with the payment period lasting 20 years, Chiang said.
Taiwan’s top five banks, including Taiwan Cooperative Bank, issued a total of NT$31.97 billion (US$1 billion) in new mortgage loans last month, the lowest since NT$21.19 billion in loans made in February, the central bank said in a statement this week.
“I’m not buying an apartment now unless housing prices fall significantly lower,” said Eric Yao (姚宗宏), 30, a renter for seven years who helps manage US$152 million in funds at Truswell Securities Investment Trust Co (富鼎投信). “A 12.5-basis-point rate cut is too small to convince me into bearing a mortgage for the next 20 years.”
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