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May 27, 2017

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Homeowners' burdens to dictate CB interest rate action

TAIPEI, Taiwan -- Whether or not interest rates will rise depends on financial burdens on home owners as well as the overall economic situation, Central Bank Governor Fai-Nan Perng (彭淮南) said yesterday.

The central bank is scheduled to hold a board meeting on March 27. The interest rate issue is expected to be deliberated. Some are concerned that the central bank might raise the interest rate, making it more burdensome for mortgage holders.

Taiwan's mortgage holders owe on average NT$6.06 million. If the central bank raises the interest rate by 0.125 percent, it will add NT$625 to monthly mortgage payments.

Perng pointed out, however, that the interest rate is not the only cause of exceedingly high realty prices in some areas of Taiwan. The housing price problem has to be tackled through various means, including looking at the overall system and observing the supply and demand, Perng said.

Higher-priced Properties Be Taxed on Actual Price: Legislator

Under normal circumstances, housing prices are five times the average annual income. The ratio does not hold true for some regions in Taiwan, Perng said.

Kuomintang Legislator Lai Shyh-bao (賴士葆) suggested that real estate with higher prices be taxed based on actual prices. Perng said he supported the idea, but the central bank is responsible for fiscal policies only.

The global economy is bracing for three major uncertainties: the U.S. Fed's tapering off of quantitative easing (QE), the Chinese government's economic re-structuring and the Japanese government's raising consumption tax, Perng said yesterday.

The tapering off of quantitative easing is a long process, and the purpose is to scale down bond purchases, Perng said, adding that the U.S.'s interest rate is being kept at 0.25 percent. The scaleback's psychological impact on the financial market is larger than real impacts, Perng said, adding that only the Fed raising interest rates can exert any real impact.

Banks Announce Mortgage

Interest Rate Hike

Despite the Central Bank's comment about financial burdens on home buyers, Chang Hwa Commercial Bank (彰化銀行) and Taiwan Cooperative Bank (合作金庫)on Thursday got the jump on peer banks to announce the hike of interest rate for home mortgages.

Chang Hwa Commercial Bank yesterday announced that it has raised mortgage interest rate for new home buyers of different financial capabilities, on which the bank classified its customers into A, B and C-class from premium to average.

Chang Hwa Commercial Bank adjusted mortgagte interest rate for A- and C-class home buyers. The rate for new A-class customers will jump to 2.22 percent from 1.9 percent in the second year, while that for C-class customers ups to 3.35 percent.

United Daily News yesterday reported that major banks' view toward Taiwan's property market turn rusty and expected most banks to follow the lead of Chang Hwa Commercial Bank and Taiwan Cooperative Bank.

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