Mortgage loan interest cut to 6 percentEconomy
Ulaanbaatar /MONTSAME/. During the parliamentary discussion held on October 16, Friday on Mongolia’s budget bills, such as State Budget bill for 2021, Social Insurance and Health Insurance Budget Bills for 2021, Minister of Construction and Urban Development B.Munkhbaatar informed that commercial banks had already started issuing mortgage loans with lowered interest rate of 6 percent to eligible borrowers.
Minister B.Munkhbaatar has also updated that MNT 50 billion and MNT 40 billion of financial sources have been made available by the central bank and commercial banks respectively to lower interest rate of mortgage loans down to 6 percent.
He also told reporters on October 20, that 38 borrowers had received mortgages with 6 percent interest, worth MNT 2.5 billion in total since the decision has been made. Minister Munkhbaatar clarified that those who already took out central bank’s subsidized mortgage loans at 8 percent and currently are paying are not eligible for the mortgage with newly reduced interest.
In order to increase affordability and accessibility of apartments and reduce air pollution in urban areas, the Mongolian government started implementing a mortgage loan program in 2013, targeting mostly families living in Ger district areas.
With loan funding from the Bank of Mongolia, commercial banks have been providing Mongolian citizens aged above 18 years old housing mortgages at a subsidized interest rate of 8 percent per annum for a maximum of 30 years for the purchase of an apartment of up to 80 square meters.
In May 2020, the Ministry of Construction and Urban Development issued a press release informing that ‘Apartment’ national program will be implemented between 2019-2023 within the framework of the government’s action plan for 2020-2024.
In September 2020, Deputy Prime Minister Ya.Sodbaatar told ikon.mn news website that in connection with the Apartment program, the government had been studying possibilities to reduce mortgage loan interest with an aim of making mortgages more affordable by providing reduced interest rate loans with government subsidies.
Concerning this measure, Governor of the Bank of Mongolia Lkhagvasuren issued an ordinance on October 1, to make a change to the central bank’s ‘Regulation for Housing Mortgage Financing’ that “housing mortgages issued before October 01, 2020 to have an annual interest of 8 percent, and housing mortgages issued after October 01, 2020 shall have an annual interest of 6 percent.”
Private residential houses in capital city are also added into the terms mentioned in the abovementioned regulation as formerly, private residential houses were only referred as houses located in aimag and soums centers of rural areas, not those in Ulaanbaatar city.
The Bank of Mongolia had reported that, in the first 8 months of 2020, mortgage loans totaling MNT 144.7 billion were issued to 2,057 borrowers.
In addition, Minister of Construction last week informed that no budget had been earmarked for the affordable housing mortgage program for next year’s state budget and around MNT 300 billion is presently accumulated to be spent for the housing mortgage in the future.