MANILA – There is a slight increase in the number of borrowers who have missed out on payments for car and housing loans, an economist said on Monday.
During a briefing, University of Asia and the Pacific economics professor Victor A. Abola said, “Banks are starting to feel past dues and defaults.”
But as to the question of whether there is a real estate bubble, Abola said such a problem may exist three or five years down the road.
The economist said there are pitfalls in the real estate companies’ strategy of offering zero down payment for homes, which could turn froths into bubbles.
In November, the Bangko Sentral ng Pilipinas (BSP) reported that universal, commercial and thrift banks increased their exposure to the property sector to P900.1 billion at end-June, up 6.8 percent from the end-March level.
This, however, remains manageable, far from the excessive investment that unduly puts lenders at risk and creates an asset bubble, monetary authorities said. Bad loans are only 3.7 percent of total residential loans.
Non performing credit card receivables also went up in the first quarter of 2013, increasing to 11.2 percent of total credit card transactions, but eased to 13 percent of big banks’ bad loans.
Credit card receivables climbed 11 percent to P131.9 billion in the first quarter last year, from P118.8 billion in the same three-month period in 2013. Universal and commercial banks held bulk of the receivables at 82.6 percent, with their subsidiaries cornering the remaining 17.3 percent.
However, “remedial measures are being put in place” by the BSP, adding that the banking system is doing well enough based on its stress tests, Abola said.
Two months ago, monetary authorities said they would tighten the monitoring of thrift banks, the main source of consumer loans.
They have also required banks to submit more detailed reports on their credit card transactions in a bid to head off any crisis building up in this business.
Abola said authorities could still stave off any danger in the property market as the rise in residential construction is steeper in the 1992-1996 period–the time the Asian financial crisis was ripening–than in the 2007-2012 period.
Even if interest rates would rise by three percentage points, Filipinos could still afford to pay for their mortgage, even those in the socialized housing segment.
“There is still a huge number of families that can pay their mortgage even in the socialized [housing]. Even those companies in the low-cost are doing well,” Abola said.
The economist said the BSP will wait for the initial acceleration of inflation to four percent after the first quarter before contemplating on whether it would hike key interest rates by 25-50 basis points.
“This would depend on how the US economy will move. The BSP is gradualist, it would not [hike interest rates that steep],” Abola said.
Earlier, the economic professor said there would be no sharp rise in local interest rates after the US Federal Reserve began winding down its massive stimulus program. He said only one-third of the change in the interest rate in the US gets transmitted to the Philippines.
“And the consensus right now in the US is the maximum 10-year US Treasury bond, maxed, is 3.5 percent. We are now at 2.9 percent,” he said. –Likha Cuevas-Miel, InterAksyon.com