HANOI: Vietnam's central bank has ordered commercial banks to cut lending rates for businesses, with rising mortgage rates hurting the real estate market, a key driver of economic growth.
The State Bank of Vietnam (SBV) told lenders to cut annual lending rates for priority sectors by 1.5 to 2.0 percentage points, it said in a directive issued on Sunday.
Banks were also told to reduce listed deposit rates by at least 0.5 percentage points for maturities of six months or more and stop competing with one another by offering higher rates for savers.
The central bank warned that lenders failing to comply with government or central bank instructions on interest rates could face tougher requirements and lower credit-growth quotas for next year.
The central bank also instructed lenders to channel credit towards productive and priority sectors as well as viable major projects while avoiding any relaxation of lending standards.
The measures are aimed at supporting economic growth while maintaining stability, controlling inflation and safeguarding the banking system, the SBV said.
Elevated borrowing costs have weighed on business activities, including the real estate market.
September annual inflation came in at 5.08 per cent, compared with 4.89 per cent in August and higher than the government's 4.5 per cent target for the year.
Property advisory firm Savills said third-quarter apartment sales in the capital Hanoi fell 26 per cent compared with the previous quarter and 48 per cent from a year earlier, while secondary market prices fell for the third consecutive quarter.
Market conditions also remained "challenging" in Ho Chi Minh City, Vietnam's largest city and business hub, Savills said.
"Rising mortgage rates are one of the factors putting pressure on the market," said Do Thi Thu Hang, Savills Hanoi Advisory Services director.
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