RISING HOME LOAN INTEREST RATES INCREASE FINANCIAL PRESSURE ON BUYERS

More Promotional Mortgage Rates Move Above 10%

According to DKRA Consulting, in August, fixed home loan rates for 12–24-month periods across 11 commercial banks averaged around 10.9% per year.

Several banks were above this level. VPBank offered a 12-month fixed rate of 13.2%, while rates at MSB and ACB were around 11%. VIB offered approximately 11.1% for a 12-month fixed period and 12% for 24 months.

Meanwhile, only a limited number of banks continued to offer 12-month fixed rates below 10%, including HDBank at 9.8%, VietBank at around 9.5%, and Woori Bank at approximately 9.3%.

The current rate environment represents a notable increase from the second quarter. A VARS-IRE survey of 10 commercial banks during that period found that homebuyers could still access 12-month promotional loans at rates of approximately 8.5–9.2% per year.

Rates Rise Across Different Banking Groups

Data from Dat Xanh Services shows that the average promotional rate for 12-month fixed loans at eight surveyed banks increased by around 0.6 percentage points from the second quarter and was nearly one percentage point higher than at the beginning of the year.

Among state-owned banks, Agribank recorded one of the most significant adjustments, with its first-year fixed rate rising from 8.2% in the second quarter to 9.5% per year. BIDV remained relatively stable at around 10.8%. Vietcombank increased slightly from 9.8% to 9.9%, while VietinBank maintained a rate of 10% after previously reaching 10.5% in May.

Private commercial banks have also adjusted their rates. Banks such as Sacombank, TPBank, and SeABank are offering promotional rates of around 11–13% per year for loans with fixed-rate periods of 12–18 months. At some banks, fixed rates have increased by approximately 0.8–1.1 percentage points.

Foreign banks have also made notable adjustments. Standard Chartered increased its promotional rate from 7.5% to 9.8% per year, while Hong Leong Bank raised its rate from 8.9% to 10.5%. Shinhan Bank has also brought its 12-month fixed rate to around 10%.

These developments indicate that home loans below the 10% threshold are becoming less common. Promotional packages at many banks have shifted toward the 10–13% range, increasing borrowing costs for buyers who rely on mortgage financing.

Advertised Rates Do Not Represent the Full Cost of Borrowing

The published interest rate is not necessarily the final rate that every borrower will pay. Actual loan terms depend on factors such as credit history, loan-to-value ratio, collateral, and each bank’s lending policies.

Buyers purchasing properties in projects affiliated with a particular bank may also receive different rates from those available under standard mortgage packages.

Borrowers should also take into account additional costs associated with their loans. According to DKRA Consulting, loan insurance or life insurance premiums at some banks may range from around 0.5–1% of the loan value, depending on the borrower’s profile. Fire insurance for mortgaged assets may also be required.

As a result, comparing mortgage products solely based on the initial advertised interest rate may not provide a complete picture of the actual financing cost.

The Greater Risk May Come After the Promotional Period

Another important consideration is that promotional rates typically apply only for a limited period. Once the promotional period ends, the loan generally moves to a floating interest rate.

Based on current market information, post-promotional rates can range from around 12–16% per year, depending on the bank and the formula used to calculate the rate.

Homebuyers therefore need to assess their repayment capacity under the post-promotional rate scenario rather than basing their financial plans solely on the lower rate offered during the first year.

For example, a mortgage with an attractive introductory rate may initially appear affordable. However, if the rate rises significantly from the second year onward, monthly repayments could increase substantially and place greater pressure on household finances.

Buyers Are Becoming More Cautious About Leverage

Rising interest rates are occurring while property prices remain high, making home purchases financed through mortgages increasingly challenging.

PropertyGuru’s real estate consumer sentiment report found that more than 80% of homebuyers and investors would only consider borrowing if interest rates were below 9% per year. Most respondents considered a rate of 5–9% to be appropriate.

When interest rates exceed 11%, buyers may become increasingly reluctant to rely on financial leverage. This could affect not only individual purchasing decisions but also overall demand and liquidity in the real estate market.

Against this backdrop, prospective buyers should calculate the total cost of borrowing, including interest, insurance, and other related fees. More importantly, their financial plans should be based on their ability to service the loan over the entire repayment period, particularly after the promotional rate expires.

With property prices yet to decline in line with higher financing costs, choosing the right borrowing timing, maintaining a reasonable loan-to-value ratio, and keeping sufficient financial reserves will become increasingly important for managing the risks associated with homeownership.