The Bank aims to make house loans more affordable by offering reduced interest rate loans with government subsidies
According to Montsame News Agency, the Bank of Mongolia is making six percent mortgage loans available through 2024 as part of the MNT10 million (USD350,950,756.96) comprehensive plan for health protection and economic recovery.
As of March 2021, the Bank of Mongolia reported a total of MNT5.2 trillion of mortgage loans from 100,867 borrowers.
Among such borrowers, 74.7 percent have taken out mortgage loans adding up to MNT3.7 trillion under the mortgage loan program, 21.7 percent from commercial banks’ own funding, and 3.6 percent from other sources. Moreover, 17 percent of all mortgage loans issued (MNT851 billion), are allocated to rural areas.
In 2013, the Mongolian government implemented a mortgage loan program, mainly targeting families in Ger district areas, to increase affordability and accessibility of apartments and reduce air pollution in urban areas.
Accompanied by loan funding from the Bank of Mongolia, commercial banks have been issuing Mongolian citizens aged 18 years and above old housing mortgages at a subsidised interest rate of eight percent per annum for a maximum of 30 years, for the purchase of an apartment of up to 80 square metres.
Since October 2020, the Bank’s regulation on housing mortgage financing has changed, reducing the annual interest rate of housing mortgages provided after October 1, 2020, to six percent. This change was intended for house loans to become more affordable, by offering reduced interest rate loans with government subsidies.
As of April 21, 2021, a total of MNT364 billion in mortgage loans with a six percent interest rate have been given out to 4,972 borrowers. The six percent mortgage loans will continue to be available through 2024 as part of the MNT10 trillion comprehensive plan for health protection and economic recovery, with MNT2 trillion set aside for mortgage loans.
As stated by the Bank of Mongolia, it is also planning to offer mortgage-backed bonds in the future, which will be used to finance subsidised mortgage loans. Hence, yearly mortgage loan funding is anticipated to increase to MNT600-700 billion, with more than 30 percent of total funding granted to those in rural areas.
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