Interest rates for ARMs to be adjusted per month, says CBC

Written by Writer on Thursday, November 13th, 2008

Interest rates for ARMs to be adjusted per month, says CBC

TAIPEI, Taiwan — Within a period of three months starting today, 11 domestic banks will accept applications from customers for revising lending contracts to adjust the interest rates for ARMs (adjustable rate mortgages) on a monthly basis instead of a quarterly basis as practiced now, so as to make customers to enjoy interest rate cuts more quickly.

The move is based on a decision made yesterday at a meeting organized by the Central Bank of China (CBC) with representatives of the Ministry of Finance, the Financial Supervisory Commission and 11 domestic banks.

At the moment, the interest rates offered by the banks for ARMs are based on the average fixed interest rate offered by major domestic banks for one-year time savings deposits plus markups set by banks themselves.

Based on the lending contracts signed by banks and their clients, the interest rates for ARMs are usually adjusted once every three months, making it impossible for loan borrowers to enjoy interest rate cuts announced by the CBC. Over the past 45 days, the CBC has announced fourth interest-rate reductions, with the total scale of cut amounting to 0.85 of a percentage point, but ARM customers have yet to see any cut on their interest payment.

Now that the 11 participating banks, which together command a 70 percent of the domestic housing loan market, have agreed to revise their lending contracts with customers, housing loan borrowers will soon benefit from interest rate cuts announced by the CBC.

The 11 banks participating in yesterday’s meeting are Bank of Taiwan, Taiwan Cooperative Bank, Land Bank of Taiwan, Hua Nan Bank, First Bank, Chang Hua Bank, Bank SinoPac, Chinatrust Bank, Cathay United Bank and E.Sun Bank.

The CBC will continue negotiating with those banks that did not attend the meeting to follow suit.

Wednesday, November 12, 2008 11:54 am TWN, The China Post news staff