Commercial banks’ lending rates for new residential mortgages fell to 4.84 per cent in December 2013 after starting the year at 6.28 per cent, the Central Bank said in its Mortgage Market Reference Rate (MMRR) report yesterday.
Following the downward trend, the outstanding rates on residential mortgages dipped 6.05 per cent in December 2013 from 6.95 per cent in December 2012.
Lower mortgage rates have helped support real estate mortgage demand throughout most of 2013, with mortgage lending by the banking system growing by 13.4 per cent (year on year) in December 2013, the Bank said.
Liquidity in the banking system remained high, and domestic interest rates remained low.
Commercial banks’ funding cost, as reflected in the weighted average deposit rate, was unchanged at 0.56 per cent in December 2013, while the 15 year Central Government bond yield rose marginally to an estimated 3.21 per cent, from 3.15 per cent in September 2013.
“On this basis, the interest rate benchmark for residential mortgages, the MMRR, remains unchanged at 2.25 per cent for March 2014. Commercial banks and their affiliated non-bank financial institutions are expected to apply this mortgage rate plus a margin to all existing residential mortgage loans that are due to be re-priced, as well as new mortgages from March 3, 2014,” the Bank said.
The margin will be negotiated between the commercial bank and customer. The margin takes into account the customer’s credit rating, the location of the property, the size of the downpayment and the size and quality of collateral, the Bank said.