Parliament resumes housing loan program
Nearly one month has passed since commercial banks suspended the issuing of eight percent annual interest mortgage loans, but the program has officially resumed with Parliament’s adoption of an amendment to the Civil Law and Law on Pledges of Immovable Property on Tuesday.
On January 18, Minister of Construction and Urban Development Z.Bayanselenge made a statement to the public, reporting that the Cabinet had made necessary changes to the Civil Law and Law on Pledges of Immovable Property creating a legal environment for lowering annual interest rates for housing loans to five percent.
She noted that citizens are able to purchase apartments of up to 100 m2 through mortgage loans with a five percent annual interest rate, while purchases of apartments of more than 100 m2 will be eligible for a housing loan with an eight percent annual interest rate.
As of today, around 70,000 households have taken out housing loans with an eight percent interest rate, and qualified loans will be transferred to a five percent interest rate. By lowering interest rates, mortgage payments will decrease by 100,000 to 150,000 MNT. The Ministry calculated that around 790 billion MNT will be required to change interest rates for qualified borrowers.
“We made the decision based on research and estimates. We exchanged views with banks to prevent any potential risk in the future. Banks need to resolve financial resources and cooperate with Mongol Bank to implement the five percent annual interest rate mortgage loan.”
Mongol Bank is implementing the housing loan program, and says that several changes need to be made to loan issuance regulations. The Construction and Urban Development Ministry reported that they are collaborating with Mongol Bank to revise regulations.
Government officials underlined that Tuesday’s approval of the amendments to the Civil Law and Law on Pledges of Immovable Property provide a normal process for loan repayment and the prevention of delayed repayment, allowing borrowers to rent out property that has been willed without permission from the original owner of the property. Supporters of the change believe it will boost economic circulation in housing, properties with mortgages will be guaranteed, and the issuing of loans will benefit small and medium-sized businesses.
Speaker Z.Enkhbold thanked the MPs who supported the amendment to laws which allowed the resumption of the mortgage loan program. Lawmakers underlined that while the eight percent interest mortgage loan is being resumed, it is indefinite when five percent annual interest rate housing loans will be issued.
Bank authorities commented, “As a legal environment for housing loans has now been created, they will now be issued regularly. Generally speaking, two doors related to mortgage loans needed to be opened. First, we needed a legal environment for housing loans. This door is now open. The second door is related to mortgage loan interest rates. The Cabinet decided that a five percent annual interest rate mortgage loan will be issued for apartments of up to 100 m2. However, the five percent interest rate housing loan can only be distributed once the President of Mongol Bank releases an order. But as the Cabinet has already made the decision, Mongol Bank’s President will probably release his order soon. Banks have reached a consensus on lowering housing loan interest rates to five percent.”
Executive Director of the Bankers Association J.Unenbat also said that now banks need to make some changes to their internal regulations, and added that starting from today, eight percent interest rate housing loans will be issued normally.
Representatives from the construction sector, including the Mongolian National Construction Association, Mongolian Building Material Producers Association, Green City Ulaanbaatar Association, Confederation of Mongolian Trade Unions, Mongolian Employers’ Federation, the Mongolian Window and Door Manufacturers Association, and Mongolian Youth Federation of Builders made a statement to the press yesterday, following approval of the amendments.
They said, “Citizens and the construction sector are grateful that the low interest housing loan has resumed. People believe that once the loan program resumed, apartment prices would increase. We have the full potential to not increasing housing prices. The construction sector’s representatives are reporting that housing prices will not rise. It is good that the Parliament, government, and the sector’s ministry have immediately taken measures for the housing loan program, cooperating with NGOs and professional organizations.”
They emphasized that issuing housing loans with a five percent interest rate and a 20 percent down payment will greatly contribute to overcoming difficulties that are faced by the construction and development sector.
Short URL: http://ubpost.mongolnews.mn/?p=17923