20.2%

Banks reported a 20.2% growth in their interest collections in 2023. Here's why.

More home buyers are now beginning to feel the effects of the BSP's rate hikes. The photo above is an email a home buyer got from his bank. It basically says that the 5.8% teaser rate from your loan in 2021 is over, and the new rate will be 9.8%.

This mortgagee's interest payments (excluding principal payments) increased by approx. Php3,000 per month.

This is just for a measly Php2.4 Mn loan. Imagine what the effects are for a Php20 Mn loan. This is one major factor contributing to the real estate slowdown that we're seeing today.

The good news is rates are expected to come down beginning 2H2024.

Ideally, once interest rates go down, the rates for home loans also go down on repricing dates. However, banks RARELY lower the effective interest rate even if the BSP reduces their policy rates.

If the BSP lowers its policy rates and your bank doesn't lower your interest rate, I suggest you "refinance" the loan. This move entails opening a new loan account with another bank with a lower interest rate more reflective of current market rates.