Taipei, March 9, 2010 (CENS)--To dampen rampant housing speculation and runaway housing prices, the Ministry of Finance (MOF), the Central Bank of China (CBC), and Financial Supervisory Commission (FSC) simultaneously signaled their intention yesterday (March 8) to put a brake on credit extension for housing speculators and luxury housing buyers.

In response to inquiries by legislators at Legislative Yuan yesterday, executives of eight major state-owned banks, all under the jurisdiction of the MOF, noted that to avoid loose credit fueling housing speculation, the banks have cut the ratio of housing loans for luxury housing buyers and housing investors to 60-70% of the housing prices, in addition to removing the grace period for repayment of principals and raising the interest rates for such loans by maximum 0.75 of a percentage point.

Liu Teng-cheng, chairman of the Land Bank of Taiwan, for instance, pointed out that the bank issued instruction to its business divisions last week, asking them to cap the loans for luxury houses at 60% of their prices, compared with the normal ratio of 80%, and put a markup of 0.5 of a percentage point on their interest rates.

Meanwhile, said Liu, the housing-loan ratio for buyers of a second house will be capped at 70%, which is further cut to 65% for buyers of a third house. In addition, they are not eligible for grace period for the repayment of principals.

In addition to reducing loans for housing speculators and luxury housing buyers, the MOF also pledged yesterday to have state-owned banks cut the ratio of loans for buyers of state-owned land.

Meanwhile, the FSC announced yesterday that it will intensify its inspection of realty loans extended by domestic banks and the effect of realty loans on their BIS (Bank of International Settlement) ratio, or capital adequacy ratio.

The FSC will also assist the Joint Credit Information Center setting up a platform for information on realty transactions and appraisal, in order to achieve transparency and rationalization of realty appraisal by financial institutions, thereby avoiding bloated housing values and excess housing loans.

In a press release yesterday, the CBC pointed out that it has asked financial institutions to deliver report on their credit extensions to common house buyers and housing investors.

(by Philip Liu)