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Gov't to discontinue preferential mortgage program.

Taipei, Aug. 12, 2009 (CENS) -- In view of the gradual upturn of the housing market, the Council for Economic Planning and Development (CEPD) has preliminarily decided to suggest the Executive Yuan (the Cabinet) discontinue the NT$200 billion preferential housing-loan program and replace it with mortgages for victims of typhoon Morakot and low- and medium-income households.

The decision was made during a meeting between representatives of the CEPD and related ministries yesterday (Aug. 11) and will be submitted to the Executive Yuan for formation into a policy.

Participants in the meeting agreed to discontinue the program after the exhaustion of the NT$200 billion quota, expected at the end of August, due to the upturn of the realty market, the government's financial difficulty, and the over-concentration of banking loans on the housing sector.

Instead, they suggested the government switch the recipients of the mortgage program to the typhoon victims and lower-income householders, so as to alleviate the government's financial burden.

Industry insiders worried about the effect of the decision, saying it may pluck the budding recovery of the market. Tsai Chung-yi, vice president of Farglory Group, noted that the mortgage program enables the government to spend limited money in exchange for robust economy growth, adding that prospective housing buyers may rush to scramble for the remaining quota of the preferential mortgage, giving the market a strong boost in the short term.

Chang Chin-o, professor of National Chengchi University, though, supported the decision, stressing that the government will have to suspend the subsidy for the realty industry sooner or later. The preferential mortgage has created bloated demand and bolstered housing prices at high levels, beyond the reach of most salaried men, despite the economic downturn, said Chang.

The decision, should it be adopted by the Executive Yuan, will constitute a major reversal of the government's policy, as the preferential mortgage program has been a major tool of the government in bolstering the housing market and the overall economy.

The government has undertaken two batches of the preferential mortgage program totaling NT$400 billion in scale since last September, with the quota for the second batch also about to be used up soon. The program costs the government about NT$2.6-2.7 billion annually for 0.7 percentage points of interest subsidy, amounting to a financial burden of NT$50 billion over 20-year term common for most mortgages.

((PL)) (GE)
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Publication:The Taiwan Economic News
Geographic Code:9TAIW
Date:Aug 11, 2009
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