Mortgage Lenders Follow Suit After Central Bank Drops Interest Rates


FEBRUARY 20, 2015

Jakarta. Banks have big plans to cut mortgage interest rates following the central bank’s move to lower benchmark interest rate, easing the burden on the country’s mortgage debtors.

Bank Tabungan Negara, Indonesia’s largest mortgage lender, plans to cut its interest rate by 50 basis points to 70 basis points, said Eko Waluyo BTN’s corporate secretary on Friday.

The lender said the move was necessary to help relieve pressure faced by debtors.

“We have conducted an evaluation of many business considerations, paying attention to both the people’s and the lender’s capacity,” said Mansyur S Nasution, a director of BTN, in a statement.

Bank Indonesia lowered its benchmark interest rate by 25 basis points to 7.5 percent on Tuesday, citing easing inflation, which had slowed to 6.7 percent in January from 8.4 percent a month earlier.

Bank Central Asia’s president director Jahja Setiaatmadja, said the lender is now offering a “fix and cap” program — a mortgage scheme which offers fixed interest for three years or capped interest for two — from Feb. 9 to May 29 with interest at a fixed rate of 8.88 percent or at a capped 9.99 percent.

This is lower than the 9.25 percent fixed and 11 percent capped rate, in the previous iteration of the “fix and cap” program, according to the BCA website.

Ali Tranghanda, the executive director of Jakarta based property consultancy Indonesia Property Watch, said lower mortgage interest rates should help current debtors and prospective buyers alike after the 12 percent interest burden of the past few years.

Mortgages account for 72 percent of new house purchase in Indonesia, according to the latest survey by Bank Indonesia.

Others pay in either cash installments or a one-time payment.

“Seeing the existing trend, it is possible to see a lower BI Rate in the future ... the property market would pick up again when BI Rate is under 6.5 percent, just like in the 2010 and 2011,” he said.

The value of mortgages in Indonesia reached Rp 314.6 trillion ($24.4 billion) over the October to December period. This amounts to about a 12 percent increase from the same period the year, according to data provided by the central bank.

Globe Asia & Investor Daily