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CIMB drops mortgage rate, ACLEDA increases volume by a third

Mortgages finance homes such as in Borey Angkor Phnom Penh.
Mortgages finance homes such as in Borey Angkor Phnom Penh. Hong Menea

CIMB drops mortgage rate, ACLEDA increases volume by a third

CIMB, the second largest bank in Malaysia, is planning to loan $15 million in the mortgage sector with a low interest rate of eight per cent in a bid to gain market share and to tape the wake of the mortgage industry in Cambodia.

The announcement from the bank said the offer would be available for three months starting from April 30 until July 30 and targeted to lend $15 million to Cambodian home buyers. During the campaign,​the bank will reduce its interest rates for home loans to 8 per cent per annum and will not charge loan approval fees. However, customers will be required to pay a legal fee to the law firm that reviews their loan application.

“We understand the needs of our customers,” said Him Seila, CIMB head of retail network.“Not everyone has all the cash to buy a house, especially a dream house, and paying developers directly can be costly. An interest rate of 8 per cent per year is amongst the lowest rates being offered in the market. Plus, during this campaign, CIMB will waive the loan approval fees.”

Stephen Higgins, banking expert and managing partner of Mekong Strategic Partners, told Post Property, however, that “mortgage rates of 8 per cent or less have been available for some time from banks like ANZ Royal and Hong Leong, so it is really a case of CIMB matching where the market is at.”

The low interest rate of eight per cent could be a rare opportunity for small-time borrowers though, because loans may be approved starting from $40,000 and up.

The bank offers loans up to 70 per cent of property value and a repayment period up to 15 years, which helps customers lower their monthly payment.

Interest rates dropped over the last years as competition in the banking sector increased
Interest rates dropped over the last years as competition in the banking sector increased. Mekong strategic partners

“Whether you are looking to buy your first home or refinance your home loan from another bank, you can be eligible for this offer,” Him Seila said, adding that in reviewing loan applications, the bank examines relevant information, especially customer’s property value and their debt-to-income ratio.

With the promotional offer of eight per cent, CIMB attempts to gain a piece of the mortgage market that is quickly gaining pace.

The biggest player in the mortgage market, ACLEDA, provided housing loans worth about $144.4 million in the first quarter of 2015, compared to the same period last year worth $113 million, which is about a 27.7 per cent increase with 6,425 clients compared to 5, 325, So Phonnary, executive vice president of ACLEDA, said.

“Housing loans in the first quarter were about 6 per cent of the bank’s total loan worth of $2.2 billion,” she said adding that “ACLEDA Bank is planning to provide $170 million for customers in housing loans in 2015.”

ACLEDA bank’s housing loan consists of a 10-year payment plan with the interest rate of 11 and 12 per cent per year, she added.

VMC Real Estate Cambodia general manager Dith Channa said bank housing loans play an important role in helping Cambodian people purchase their own home.

“The housing loan provision has not shown problematic yet, because the bank has clear, strong policies before they provide customers with the loan,” he said.

When comparing housing interest rate with other countries, Cambodia’s interest rates are higher, he added.

However, much to consumers’ advantage, overall interest rates, for mortgages included, have steadily decreased over the last years due to increasing competition in the financial sector (view info graphic) as the country is becoming hungrier for financing in all sectors.

Construction projects approved in Cambodia stood at $2.5 billion last year, according to the ministry of land management, urban planning and construction, a 10 per cent increase from last year.

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