AYALA-led Bank of the Philippine Islands (BPI) expects the impact of accelerating interest rates in three years to four years’ time.
“We are anticipating the lower appetite to come in three years to four years’ time because these [rate hikes] will affect the sales of the developers during the pandemic,” Dennis T. Fronda, BPI Retail Lending Group Head, said during the launch of the lender’s “MyBahay” loan facility. “During the pandemic, the developers stretched the payment terms up to five years.”
Based on data shared by Bangko Sentral ng Pilipinas (BSP) Governor Felipe M. Medalla, interest rates have been raised by monetary authorities by 225 basis points since May this year. The highest interest rates were raised in July at 75 basis points (bps) while the lowest was at 25 bps in May and June. (See https://businessmirror.com.ph/2022/10/25/bsp-chief-rate-hike-to-match-feds-move/)
The BSP also raised interest rates by 50 bps in August and September. In total, the Monetary Board raised interest rates five times this year.
Fronda said the impact of these rate hikes would be marked by a slowdown in the property market.
“We expect a little slow down by 2024, 2025. These are people who bought properties three years to five years back,” he said.
Currently, Fronda said they still see “a demand.”
“There is a segment; that is why we want to enter this segment to make up for the shortage for the other segments.”
Loan product
FRONDA was referring to the lower-end real estate industry that BPI is targeting through the “MyBahay” loan product that offers flexible payment options and cheaper amortization rates.
The lender offers “MyBahay” to Filipinos who are unable to meet the standards of regular housing loans offered by banks in the country.
Fronda said they see MyBahay would help address the challenges faced by Filipinos in securing a regular house loan. These challenges include a high downpayment and monthly amortization. Some are also disqualified from a loan because of below-required income threshold.
Fronda pointed out there are 7.13 million middle-income individuals or 1.75 million Filipino families who are looking for an “affordable” and “accessible” home financing solution.
“[This is the] first housing loan product offered by a commercial bank that allows individual borrowers to take a housing loan for downmarket real estate properties,” Fronda said in his presentation last Wednesday in Makati City.
The lending window, he added, provides an opportunity for middle-class households to own a home as it requires minimum downpayment and a flexible loan term.
Maria Cristina L. Go, the bank’s consumer banking head, said they also consider MyBahay as their contribution to resolving the country’s persisting housing backlog that is currently at 6.5 million.
Go noted that the housing backlog would balloon to 10.5 million in the next five years as estimated by the Department of Human Settlements and Urban Development.
“Our inspiration is the fact that more than 80 percent of Filipinos continue to dream of having their own homes, living in their own homes…and we at BPI realized that we have an important part to play in helping them to afford these dreams—helping them realize that these are possible not later but sooner, today rather than tomorrow,” Go said in her video message.
Defining qualities
FRONDA said that the housing loan facility will have three defining qualities compared to their regular housing loan: the minimal cash out would be up to 95 percent of the appraised value, the maximum loan term is up to 30 years, and gross monthly income (GMI) of only P25,000.
The BPI’s regular housing loan has a P40,000 GMI requirement with a loanable amount being up to 90 percent of the appraised value that can be paid for up to 20 years.
The loanable amount under the MyBahay product is as low as P300,000 and as high as P2.85 million. Eligible borrowers are individuals at least 21 years old but nore more than 70 years old upon loan maturity.
Fronda expressed optimism that the P2-billion current funding for the lending product would be easily availed within six months despite accelerating interest rates.
He added that the interest rates for the loan would depend on prevailing market rates but the BPI would offer an option of fixed rate for as low as one year or for as long as 30 years to qualified borrowers.
The bank’s housing loan program would also feature rebates with good standing borrowers receiving 2 percent of their total interest paid during loan anniversary.