Taiwan central bank holds rates steady, eases housing credit controls
Taiwan's central bank kept key interest rates unchanged for a 10th straight quarter, but raised the maximum loan-to-value ratio for second-home buyers to 70 per cent from 60 per cent. The move signals confidence that property lending has cooled enough to allow targeted relaxation without undermining
The central bank of Taiwan kept its key interest rates unchanged for a 10th straight quarter yesterday while easing housing credit controls, signaling confidence that property lending has cooled enough to allow a targeted relaxation without undermining financial stability.
The central bank left its discount rate at 2 per cent, the collateralised lending rate at 2.375 per cent and the short-term lending rate at 4.25 per cent. However, it increased the maximum loan-to-value ratio for people buying a second home to 70 per cent from 60 per cent and ended a restriction on loans for land purchases.
Central bank Governor Yang Chin-long said that monetary policy has remained relatively tight since 2024, helping stabilise domestic prices and anchor inflation expectations. “We still have time to observe,” Yang said, adding that two central bank board members dissented, while the majority backed maintaining the current policy stance. Some members nevertheless warned that inflation still requires close monitoring, he said.
The cautious approach reflects uncertainty over the global economic outlook and the potential effect of conflict in the Middle East on Taiwan’s prices and economy, Yang said. Domestic inflation is manageable this year and is expected to fall below 2 per cent next year, while economic growth is expected to remain solid, he said.
The central bank lifted its forecast for full-year economic growth to 11.48 per cent and said it expects the pace to slow to 5.82 per cent next year. It also raised its growth forecasts for this year’s consumer price index and core CPI to 2.03 per cent and 2.16 per cent respectively, putting both above its 2 per cent inflation watch level.
The easing in housing comes as property lending has continued to moderate. Real-estate loans accounted for 34.44 per cent of total bank lending at the end of July, down from 35.56 per cent in March and 37.61 per cent in June 2024. Credit flows into property have dropped, while first-home buyers account for a growing share of residential mortgage borrowers, Yang said. Lending for urban renewal and reconstruction of aging or unsafe buildings has also taken up a larger share of construction loans, he said.
The central bank also removed a requirement introduced in December 2021 that land loans be accompanied by a commitment to begin construction within a specified period. Yang cited labour shortages and difficulties disposing of excavated soil as factors that can delay projects. Commercial banks have gained more experience managing property-related credit risks after several years of tighter controls, giving the central bank room for a targeted relaxation of land-financing restrictions, Yang said.
