On Monday, the Ministry of Construction and Urban Development and Golomt Bank signed a memorandum on issuing an eight percent mortgage loan with a required 10 percent down payment.
Prior to the decision of the Cabinet to reduce the down payment to 10 percent for real estate purchases, borrowers were required to pay a 30 percent down payment. Head of the Strategy, Policy and Planning Department of the Ministry Kh.Batbold said that there are unsold apartments for 17,700 households throughout the country as of the third quarter of this year. He said, “People want but can’t buy apartments because of their financial situation. The decision made by the Constitutional Court led banks to end the annual eight percent interest mortgage loans for an indefinite period of time.”
Batbold added that the memorandum established with Golomt Bank will provide people with the possibility to apply for a low interest mortgage loan with a 10 percent down payment, regardless of the decision made by the Constitutional Court. He said that the government will issue a guarantee for 20 percent of the value of the property, and mortgage loan applicants will need to complete the necessary loan application materials.
The Ministry believes that construction companies need to reach an agreement with commercial banks and the issuing of mortgage loans should resume. Commercial banks claim that they can resume issuing the eight percent interest mortgage loans, but Parliament needs to create risk-free loan conditions for banks by amending the Law on Real Estate Mortgages.
It is uncertain when the issuing of the loans will begin again. Last month, commercial banks issued 69.2 billion MNT in new mortgage loans to 1,075 borrowers. The remaining balance of the mortgage loans has now reached 3.4 trillion MNT. Mortgage loan issuance in November was down by 13.9 percent compared to October, and the figure decreased by 14.9 percent in comparison with the same period in 2014.