Fed-spooked mortgage holders in SE Asia offered glimmer of hope

JAKARTA - A surprise loosening of monetary policy in parts of Southeast Asia is offering a glimmer of hope to home owners bracing for higher mortgage rates later this year when the US Federal Reserve is expected to tighten policy.

Bank Tabungan Negara, a leading mortgage lender in Indonesia, will lower the cost of mortgages starting next month, after the central bank's unexpected 25-basis-point cut in interest rates last week.

State-controlled Bank Tabungan Negara will reduce mortgage rates by about 75 bps for non-subsidized mortgages, depending on the segment and size of the loan, and about 200 bps for subsidized mortgages, Director Mansyur Nasution told Reuters.

The prospect of higher interest rates has weighed on property markets, particularly in Singapore, where interest rates have a strong correlation with US rates, which are seen rising later this year as the US economy recovers. Higher mortgage payments could trigger forced sales and defaults, especially for home owners with multiple properties.

Last year, the value of high-end residences slumped more in Singapore than in Indonesia, data from property consultant Jones Lang LaSalle shows. Values in Thailand and the Philippines rose.

Some of the region's central banks are loosening monetary policy - the opposite of what many expected them to do this year - as the sudden drop in oil prices forces inflation lower. Singapore's monetary authority eased policy in January, and Bank Indonesia followed on Feb. 17. Many expect the Bank of Thailand to reduce rates at its next policy meeting on March 11.

"In the short term, such fluctuations (in interest rates) may not necessarily support property markets, but if this is sustained and interest rates remain low for a prolonged period this would definitely support the demand for housing in the medium to longer term," said Chua Yang Liang, head of Southeast Asia research at Jones Lang LaSalle.