Gov’t argues it would be ‘risky’ for banking sector to subsidize housing mortgage interests

The government will not subsidize housing mortgage interest rates in Macau, which happens elsewhere in the world, because that would pose a risk to the banking sector and to Macau’s financial stability, the Secretary for Economy and Finance, Lei Wai Nong, said yesterday at the Legislative Assembly.

Lei was replying to questions from lawmakers, especially Ella Lei, about support measures, financial help, and tax benefits to the population, saying there are no plans for such a scheme.

“This can pose a risk, namely to young people who want to acquire houses. If there is an economic downturn this could cause a significant increase on interest rates that would put them in credit risk,” Lei said, adding, “We also need to guarantee the stability of Macau’s banking system and ultimately Macau’s financial stability in general.”

He referred to the American example where the US Federal Reserve has raised interest rates 11 times and the current interest rate is now between 5.25% and 5.5%, a figure commonly followed worldwide.

Lei said that, if the government subsidizes part of the interest rate, many young people would have the illusion that they might be able to support the expense of acquiring a house and repaying a mortgage based on the instalment amount calculated at the moment of the acquisition.

However, due to economic instability, this amount can change suddenly with consequent bad performing loans.

Over the years, several experts have noted that Macau’s real estate market is highly speculative and the real value of the housing units is far lower than the market price requested for them.

Banks are hesitant to lend a high percentage of the purchase price because, if the mortgage contract is not repaid, and even if the bank repossesses the property, this would not cover the amount of unpaid loan.