Last April during the Mongolian Economic Forum Minister of Construction and Urban Development made an announcement which turned the attention of many.
The announcement was reduction of the mortgage loan deposit to 10 percent.
According to the current regulation eligible person for the mortgage loan should pay 30 percent deposit. The change was to be made in reducing the deposit amount to 10 percent and drop the restriction of the eligible housing to be up to 80 sq.m. at most.
Today during the press release at the Ministry of Construction and Urban Development minister D.Tsogtbaatar announced that the cabinet has supported the reduction of the deposit to 10 percent through its session held on Monday.
Although there was a demand on residential housing it was not possible for the low income residents to realize their demands, while with current developments and support from the state acting as the guarantor for the 20 percent of the deposit residents are enabled to purchase housing through mortgage loans.
Commercial banks requirements stay the same while the eligible person for the mortgage loan should apply for the 20 percent guarantee from the Development Bank of Mongolia.
Minister emphasized that this decision is beneficial for both construction companies and residents as the new regulations will help to balance the supply and demand on the market.
With the decrease in the deposit amount many fear the sudden increase in the prices of the property, to which minister answered: "This is not the gift from the government. It is an opportunity for the residents. We haven't pushed commercial banks to lower their requirements. This is the best involvement of the state into the market. We can't allow the banks to go bankrupt and economy should proceed on its own principles."
SINCE WHEN RESIDENTS WILL BE ABLE TO PAY 10 PERCENT DEPOSIT?
New regulations and rules for mortgage loan are being developed jointly by Ministry of Construction and Urban Development, Ministry of Population Development and Social Welfare and Ministry of Finance. Those will be ready within next months as per PMs order. Which means by end of next month residents with constant income and who have been paying social welfare fees will be able to get mortgage loans with 10 percent deposit.
But the number of the residents to be included in the program is limited as the state is only providing guarantee for MNT 200 billion through the Development Bank of Mongolia.
In view of the limited funds available currently, Minister of Finance was ordered to seek for the ways to finance this program further and budget additional funds in the budget of next year.
MORTGAGE LOAN CURRENT SITUATION
Currently 30,000 housings are waiting to be sold, while the construction companies are tied with loans. If the situation is to proceed this way construction sector is to face serious problems. The decline in the deposit will benefit construction companies as the estimates forecast that at least 10,000 currently available supply to be sold. Minister D.Tsogtbaatar also emphasized that housing prices won't go up as the mortgage loan with 10 percent deposit will be available for only those housings which are already ready for purchase or will be ready soon.
Moreover, minister mentioned that the program will be directed mainly for low and middle income residents. The regulations will clearly define which residents are elgibile for the mortgage loans. Since the mortgage program started in 2013:
- MNT 556 billion loans were refinanced and transfered into 8 percent loans for 19,116 residents
- MNT 197 billion of new mortgage loans approved for 36,864 residents
Estimates forecast the following positive outcomes of 10 percent deposit:
- Balanced supply and demand on housing market
- Protect construction sector from financial risk
- Mortgage loan program to proceed further
- Increase housing supply for population
In conclusion the commercial banks will still require 30 percent deposit for mortgage loans. No changes will be made for those residents who already have mortgage loans with deposits made of 30 percent. Bank of Mongolia is conducting studies on possibilities to drop the limit on size of the housing, which is currently should not exceed 80 sq.m.
Last April during the Mongolian Economic Forum Minister of Construction and Urban Development made an announcement which turned the attention of many.
The announcement was reduction of the mortgage loan deposit to 10 percent.
According to the current regulation eligible person for the mortgage loan should pay 30 percent deposit. The change was to be made in reducing the deposit amount to 10 percent and drop the restriction of the eligible housing to be up to 80 sq.m. at most.
Today during the press release at the Ministry of Construction and Urban Development minister D.Tsogtbaatar announced that the cabinet has supported the reduction of the deposit to 10 percent through its session held on Monday.
Although there was a demand on residential housing it was not possible for the low income residents to realize their demands, while with current developments and support from the state acting as the guarantor for the 20 percent of the deposit residents are enabled to purchase housing through mortgage loans.
Commercial banks requirements stay the same while the eligible person for the mortgage loan should apply for the 20 percent guarantee from the Development Bank of Mongolia.
Minister emphasized that this decision is beneficial for both construction companies and residents as the new regulations will help to balance the supply and demand on the market.
With the decrease in the deposit amount many fear the sudden increase in the prices of the property, to which minister answered: "This is not the gift from the government. It is an opportunity for the residents. We haven't pushed commercial banks to lower their requirements. This is the best involvement of the state into the market. We can't allow the banks to go bankrupt and economy should proceed on its own principles."
SINCE WHEN RESIDENTS WILL BE ABLE TO PAY 10 PERCENT DEPOSIT?
New regulations and rules for mortgage loan are being developed jointly by Ministry of Construction and Urban Development, Ministry of Population Development and Social Welfare and Ministry of Finance. Those will be ready within next months as per PMs order. Which means by end of next month residents with constant income and who have been paying social welfare fees will be able to get mortgage loans with 10 percent deposit.
But the number of the residents to be included in the program is limited as the state is only providing guarantee for MNT 200 billion through the Development Bank of Mongolia.
In view of the limited funds available currently, Minister of Finance was ordered to seek for the ways to finance this program further and budget additional funds in the budget of next year.
MORTGAGE LOAN CURRENT SITUATION
Currently 30,000 housings are waiting to be sold, while the construction companies are tied with loans. If the situation is to proceed this way construction sector is to face serious problems. The decline in the deposit will benefit construction companies as the estimates forecast that at least 10,000 currently available supply to be sold. Minister D.Tsogtbaatar also emphasized that housing prices won't go up as the mortgage loan with 10 percent deposit will be available for only those housings which are already ready for purchase or will be ready soon.
Moreover, minister mentioned that the program will be directed mainly for low and middle income residents. The regulations will clearly define which residents are elgibile for the mortgage loans. Since the mortgage program started in 2013:
- MNT 556 billion loans were refinanced and transfered into 8 percent loans for 19,116 residents
- MNT 197 billion of new mortgage loans approved for 36,864 residents
Estimates forecast the following positive outcomes of 10 percent deposit:
- Balanced supply and demand on housing market
- Protect construction sector from financial risk
- Mortgage loan program to proceed further
- Increase housing supply for population
In conclusion the commercial banks will still require 30 percent deposit for mortgage loans. No changes will be made for those residents who already have mortgage loans with deposits made of 30 percent. Bank of Mongolia is conducting studies on possibilities to drop the limit on size of the housing, which is currently should not exceed 80 sq.m.