Consumers to pay more for auto, housing loans

MANILA, Philippines - Filipinos are expected to pay higher interest on their car and housing loans after experts said that the central bank will further hike lending rates. At the annual stockholders’ meeting of the Philippine National Bank (PNB) on Tuesday, bank officials said that short-term interest rates are seen to climb “over the next 12 months." This sentiment was echoed by the Basel, Switzerland-based UBS, Europe’s largest lender in terms of market capitalization and profitability. Latest comments from UBS indicate that the Bangko Sentral ng Pilipinas is seen to pursue its “tight money" policy. By making loans more expensive, the said policy is expected to curb economic growth because businesses will find it more difficult to bankroll their expansion. On the other hand, the policy action will control the Philippines’ inflation rates, which is expected to hit double-digit levels by September. UBS, also the world’s largest manager of private wealth assets, said that BSP will raise rates by 25-basis points, weeks after it increased borrowing costs for the first time in two years. Currently, the country’s central monetary authority borrows from lenders at a rate of 5.25 percent. It lends to banks at 7.25 percent. “We see domestic interest rates leading higher this year. Our treasury operations has taken a short-duration stance," PNB first senior vice present Ramon Lim said. Lim is in charge of the bank’s treasury operations whose revenues are expected to contribute more than a third of the lender’s P2 billion profit this year. The unit’s activities include trading in currencies and government and privately-issued securities. Meanwhile, UBS’ Singapore-based researchers said that monetary officials of both the Philippines and Thailand should express its respective “willingness to tighten policy." Once pursued, the policy will also enhance the local currency’s value, making peso-denominated assets and bonds more attractive. “We believe the message from the investment community is that the Bank of Thailand and the Philippine central bank need to surprise the market consensus with their willingness to tighten monetary policy if investor sentiment were to turn more positive and the weakness in the exchange rate along with bond markets is to be arrested," UBS said. Manila’s rates for one-year treasury bills—which are sold by the government to fund its annual cash requirements—fell 8.7 basis points after the finance department announced a budget surplus for May alone. Not only did the surplus narrow the government’s five-month deficit, it also indicated that the Philippines will have excess cash for infrastructure projects, salaries of officials, among others. - GMANews.TV