Tue, May 17, 2022 page12

• First-time buyers safe from shortened mortgages

  UNDER DEBATE: Potential credit controls would only affect corporate buyers, houses in the special municipalities and people with third home mortgages, the central bank said

  • By Crystal Hsu / Staff reporter
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  The central bank said its recent discussions about shortening mortgage periods would not affect first-time home buyers or urban renewal projects, but would be aimed at corporate buyers and multiple home owners, who are already subject to selective credit controls.

  The central bank made the clarification in a statement on Saturday to calm fears that it would shorten mortgages from 30 years to 20 years during its June policy meeting in another bid to cool the housing market.

  Central bank Governor Yang Chin-long (楊金龍) had told a meeting of the legislature’s Finance Committee on Thursday that there was still room for improvement regarding efforts to regulate real-estate financing, especially in areas with evident price hikes.

  

  Central bank Governor Yang Chin-long speaks at a meeting of the legislature’s Finance Committee in Taipei on Thursday.

  Photo: CNA

  “House loans remain high, though stable,” Yang told lawmakers, adding that he was considering further selective credit controls, such as tightening mortgage terms and lowering loan-to-value ratios.

  Property analysts said the proposed measures, if realized, would hit young first-home buyers the hardest, as their monthly mortgage payments could inflate significantly and many might default, wreaking havoc on the nation’s financial system.

  People with 30-year mortgages of NT$10 million (US$335,412) would have to pay NT$49,413 per month, up from NT$35,724 at present, if they are switched to a 20-year mortgage scheme with an annual interest rate of 1.75 percent, senior property broker Lee Tung-rong (李同榮) said.

  Shortening mortgage periods is a policy tool under consideration that would not apply to first-time home buyers, who have been excluded from its previous four macro-prudential measures, the central bank said.

  Fresh selective credit controls, if deemed necessary at the board meeting on June 16, would only target corporate buyers, houses in hotspots and people who have third home mortgages, the central bank said.

  Hotspots refer to the six special municipalities: Taipei, New Taipei City, Taoyuan, Taichung, Tainan and Kaohsiung, as well as Hsinchu City and Hsinchu County.

  The central bank has banned grace periods for home purchases in those areas and is considering whether to cut their loan-to-value ratios, Yang said.

  Lower loan-to-value ratios proved effective in cooling property fever years ago, he said, adding that stricter mortgages would also make home owners more cautious when planning their finances.

  Several board members at the central bank’s March meeting said that housing price hikes bolster inflationary pressures, and the popular belief that owning real estate is the best defense against inflation suggests a need for policy intervention before it is too late.
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