Cabinet raises mortgage financing and keeps interest at 8 percent
Cabinet resolves to annually finance MNT 500 billion for mortgage
1 долоо хоног өмнө
At its regular session yesterday, the Cabinet approved the revision to the mortgage program. Interest rate remained unchanged at 8 percent and the program will be financed from the State Budget and the Bank of Mongolia (BoM) Officials highlighted that the annual financing for the program, which was MNT 300 billion, will be increased to MNT 500 billion. Funding for the mortgage loan will be reflected in the state budget and will be distributed to commercial banks through the BoM under trilateral contract between the Ministry of Finance, Ministry of Construction and Urban Development and the BoM.
Furthermore, the revision will forbid commercial banks from spending the program funding for different purposes, rejecting loan requests on groundless basis and establishing mortgage agreement that prevents citizens from settling the debt before due. The loan will be issued for apartments not bigger than 80 square meters, built in accordance with general urban development plan of local municipality. Mortgage revision also allows loan access up to MNT 60 million for individuals in building a private house not bigger than 120 square meters and energy efficient with essential engineering. Maturity of the loan will be not more than 360 months with an annual interest of eight percent and minimum downpayment of 30 percent of total price. Loan-to-value ratio must not be higher than 70 percent. The lender must be over 18 years of age and legally capable, who has no outstanding loan debts or payables that must be repaid in compliance with court decisions, must be a first-time buyer and have a collateral to receive mortgage. As of September, a total of MNT 233 billion worth mortgage was issued to over 2,700 borrowers.
IMF PROGRAM PREVENTS MORTGAGE INTEREST REDUCTION
After the session, Minister of Construction and Urban Development Badelkhan Khavdislam held a press conference and commented on the Government’s inability to reduce mortgage loan interest rate and downpayment. “Due to our involvement with the International Monetary Fund (IMF) program, we are in no position to reduce down payment and interest rate of mortgage program.
• Mortgage program will be financed from the State Budget and commercial banks.
• The revision allows loan access up to MNT 60 million for building a private house not bigger than 120 square meters.
• Loan conditions to ease in 2020 after the program is transferred to Ministry of Finance from BoM.
As negotiated with the IMF, the program will be transferred from the BoM to the Ministry of Finance on January 1, 2020. Loan conditions could be eased off when it happens,” addressed Mr. Badelkhan. He highlighted that the revision focuses more on housing ger district households as it will allow loan access to people who are willing to construct accommodation specified by the general urban plan and first-time buyers will only be able to purchase accommodation built within the frame of city replanning. According to a study conducted by the Ministry of Finance and BoM in May,
● 42,000 people are currently looking for rental apartments,
● 33,000 people in UB are willing to purchase accommodation with 30 percent downpayment and 14,000 in other provinces. As of September, a total of MNT 115 billion has been financed from the state budget and MNT 220 billion from the BoM to finance the mortgage program.