An apartment complex in Tây Mỗ, Hà Nội. VNA/VNS Photo

Compiled by Hoàng Anh

A tightening monetary stance has pushed home loan interest rates sharply higher, compelling both owner-occupiers and property investors to reassess financial plans. As financial costs increase, leverage-driven strategies that were viable during the low-rate cycle are facing mounting constraints.

Mortgage rates have climbed to 12–14 per cent per year once preferential periods expire, placing the real estate market under pressure after more than a year of abundant liquidity and rapid price growth.

At the end of 2025, many private investors purchased apartments using bank leverage. Their calculations were based on a preferential rate of around 9.5 per cent per year for the first 18 months, followed by a floating rate they considered manageable.

When informed that the post-preferential rate could exceed 14 per cent, the projected return may change substantially. With price growth moderating compared to the previous boom, expected capital gains would struggle to offset borrowing costs and liquidity risks.

A similar reassessment is underway among consumers. Many who planned to buy a home for personal use have delayed this purchase after observing successive rate adjustments. A preferential package initially offered at 5–6 per cent per year was revised to 6.8 per cent, then above 7 per cent, and now stands near 9 per cent during the grace period.

“If the floating rate exceeds 12 per cent, a long-term loan becomes a heavy burden relative to my income,” said Hiếu, a Hà Nội resident, adding that he has put on hold plans to buy an apartment in Đông Anh.

These cases reflect a broader shift. When borrowing costs rise rapidly and unpredictably, investors and households must recalibrate cash flow assumptions. Interest rates directly determine repayment capacity and long-term financial performance.

Surging rates

Among the State-owned commercial banks, Vietcombank has applied post-preferential mortgage rates of up to 13.9 per cent per year with a fixed term for the first 24 months. BIDV has adjusted real estate lending rates to around 13.5 per cent per year.

In the private banking sector, floating rates commonly range from 11 to 15 per cent, depending on loan tenor and customer profile.

For leveraged investors, such increases materially alter risk exposure. When loans account for 50–70 per cent of an asset’s value, interest rate fluctuations magnify both gains and losses. During the expansion phase, annual price increases of 10–15 per cent could offset funding costs. In a flat or weakening market, that margin narrows considerably.

According to the Vietnam Association of Realtors (VARS), loss-cutting sales are increasing among investors who entered the market at peak valuations and relied heavily on credit. As preferential periods expire and monthly repayments rise, some are liquidating assets to rebalance cash flow. While this does not indicate systemic distress, it has contributed to softer pricing in certain segments.

Transaction data points to weakening demand

In the fourth quarter of 2025, apartment sales in Hà Nội fell 33 per cent year-on-year, while townhouse transactions dropped 77 per cent, according to VARS.

A strategy report by VinaCapital projects that 2026–2027 may see a significant increase in supply rather than another price surge. If additional supply enters the market while borrowing costs remain elevated, pricing pressure could intensify.

Uneven impact

The effect of higher rates is not uniform. Investors with low leverage, stable rental income or long-term land holdings face less immediate strain. In contrast, short-term traders dependent on rapid price appreciation have limited flexibility when expected returns do not clearly exceed funding costs of 12–14 per cent.

Developers are also confronting higher financial expenses. Projects financed largely through bank credit face rising interest burdens, compressing margins. If selling prices have already been fixed, profitability may erode; if not, raising prices becomes difficult amid softening demand.

Nguyễn Văn Đính, Chairman of VARS, said elevated interest rates could curb speculative activity in the short term. However, if maintained for an extended period, they may constrain new supply and exacerbate structural imbalances between supply and demand. He called for flexible credit management and more stable, long-term loan packages for genuine homebuyers, alongside broader capital channels beyond bank financing.

Overall, speculative investors are responding cautiously rather than reactively. As capital costs stabilise at higher levels, the property market appears to be entering a period of adjustment in which disciplined leverage management and realistic return expectations will determine resilience. — VNS