With housing demand remaining strong, banks are optimistic 2017 will be a big year for mortgages.

The HCM City Real Estate Association (HoREA) said last year mortgages worth VND70 trillion (US$3.07 billion) was taken out from banks in the city.

According to the 2016 financial report by the National Financial Supervision Commission, while credit flowing into the property market rose by only 12 per cent in 2016 compared to 28 per cent the previous year, consumer credit rose by 39 per cent with more than half of the loans used for buying or repairing homes.

This indicates there is massive demand for housing loans.

Traditionally, the mortgage market is busy around Tet (Lunar New Year) as people usually borrow to buy or renovate houses. Lenders compete fiercely for a share of this pie, offering cheap loans.

In January Sai Gon Thuong Tin Commercial Bank (Sacombank) earmarked VND3 trillion for mortgages at 8.5 per cent interest.

Asia Commercial Bank offered home loans at 7.5 per cent, while Viet Nam International Bank offered 7.8 per cent for the first six months.

Dau Tu (Viet Nam Investment Review) newspaper quoted several banks as saying that mortgages are expected to surge due to rising demand from middle-income customers.

Truong Dinh Long, Deputy General Director of Orient Commercial Bank, told Dau Tu that with more than 50,000 couples marrying every year in the city, demand for housing, especially low-priced, would surge this year.

But it is unlikely that lenders will be capable of competing on interest rates.

Circular 06/2016/TT-NHNN, which came into effect last January, reduces the ratio of short-term deposits that can be used for medium- and long-term loans from 60 per cent to 40 per cent. The property sector is set to take a hit from this since mortgages usually have a medium- or long-term tenor.

Besides, the deposit interest rates are inching up, making it harder for lenders to lower lending rates, especially for consumer loans.

Dau Tu quoted Long as saying that if deposit interest rates keep heading north, lending rates too would rise.

But a senior Sacombank executive said lending rates would not change much this year. — VNS