Banks not passing on full interest rate cuts to borrowers

Duc Anh in Hanoi found he received a mere 0.15 percentage points discount from 14.7% to 14.55% a year after the State Bank of Vietnam lowered its policy rates in the first quarter, and banks subsequently brought down rates.

"I was hoping for a stronger discount, but in reality the rate barely changed," he said.

Anh in 2021 borrowed VND1 billion ($42,629) to buy an apartment in Nam Tu Liem District at a rate of 7.8% a year, which increased quickly to 14.55%. He said the meager discount had barely reduced his repayments.

Apart from homebuyers, property investors are also facing higher loan interest.

Vinh, owner of a property investment company, is paying 15% on loans to buy a land lot, a decline of 1 percentage point from earlier this year.

The high rates are putting him at financial risk, and he cannot sell a house to pay the interest as the current market is unfavorable and prices have dropped.

Although banks have lowered their deposit interest rates, they have only brought down loan interest rates for new customers.

The discount for old borrowers is mostly tiny, a bank employee told VnExpress, asking to not be identified.

She said her bank’s interest on property loans had declined by only 0.5 percentage points from the end of last year to 10.5% now. This reduction, however, applies only to new loans, and previous borrowers still have to pay 14-14.5%.

The CEO of a private lender told VnExpress that it took time for rate reductions to have an impact on the market, and borrowers would see a stronger discount in the second quarter.

Some analysts at stock brokerages have said that as the bad debt ratio seems to be increasing in the first quarter, banks are keeping high rates to have capital to prepare for the worst.

Deputy Governor of the SBV Dao Minh Tu last month said that some banks still kept high loan rates of 13-14% and urged them to bring the rates down to support struggling businesses.

However, few banks have made such adjustments.

One of them, Sacombank, had lowered its rates by 0.5-2 percentage points from the end of last year.