Six-percent mortgage loans to be available through 2024Economy
Ulaanbaatar /MONTSAME/. The Bank of Mongolia has reported that there are a total of 100,867 borrowers of mortgage loans totaling around MNT 5.2 trillion as of March 2021. Among them, 74.7 percent or 75,570 borrowers have taken out mortgage loans amounting to MNT 3.7 trillion under the mortgage loan program, 21.7 percent of borrowers have loans sourced from the commercial banks’ own funding and 3.6 percent are from other types of sources. 17 percent of all mortgage loans issued, which equal to MNT 851 billion are allotted in rural areas. In March 2021 alone, banks issued loans to 1,870 new borrowers with total funding of MNT 149 billion.
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 eight percent per annum for a maximum of 30 years for the purchase of an apartment of up to 80 square meters.
Beginning from October 2020, the Bank of Mongolia’s regulation on the housing mortgage financing have been changed to reduce the annual interest rate of housing mortgages issued after October 01, 2020 down to six percent with a view to make mortgages more affordable by providing reduced interest rate loans with government subsidies.
As of April 21, 2021 a total of MNT 364 billion in mortgage loans with a six-percent interest rate have been disbursed to 4,972 borrowers. The six-percent mortgage loans will remain available as part of the MNT 10 trillion comprehensive plan for health protection and economic recovery with MNT 2 two trillion earmarked for mortgage loans through 2024.
According to the Bank of Mongolia, it is also planning to issue mortgage-backed bonds in the future, with an annual repayment of MNT 350-450 billion, which will be used to finance subsidized mortgage loans. As a result, yearly mortgage loan funding is expected to grow to MNT 600-700 billion, with at least 30 percent of the total funding provided to borrowers in rural areas.