After a period of being suppressed, lending interest rates could rise, he said, and monthly bank repayments would be nearly equal half of his income. 

“It’snot that I no longer need a house, but that I do not dare borrow yet,” he said.

In the current real estate market, many end-users and small investors share the same state: the need is still there, but they hesitate to spend money. 

Home prices are not low, while borrowing costs are no longer as comfortable as they were a few years ago. The market has slowed down as interest rates move away from the previously low baseline. 

Bank interest rates are rising enough to change the behavior of homebuyers and investors.

Causes behind interest rate rise

Many assume rising interest rates are the result of tighter monetary policy. But a closer look at the structure of the banking system shows that rates are increasing not because the State Bank wants them higher.

By the end of 2025, total system-wide credit had grown by nearly 19 percent, pushing outstanding loans to about VND18.4 quadrillion. Meanwhile, deposits increased by only around 14–15 percent to VND17.4 quadrillion. In other words, banks are lending significantly faster than they are mobilizing funds.

The Vietnam Banks Association has explicitly warned that the gap between credit and deposits across the system had reached roughly VND1.6 quadrillion by the end of 2025.

When credit grows faster than deposits, banks are not short of money in absolute terms, but they lack stable capital for long-term lending. In such conditions, interest rates are no longer a discretionary policy tool, but a safety valve to protect liquidity.

As lending outpaces the mobilization of stable funding, capital costs inevitably rise. In that context, expectations of sharply lower lending interest rates are unrealistic, even if inflation remains under control.

According to economist Le Xuan Nghia, tighter management of bank accounts for tax purposes has prompted many business households, previously large depositors, to withdraw savings over a short period.

These withdrawals did not drain liquidity from the system as a whole, but they were sufficient to push some banks, especially smaller ones, into tighter liquidity conditions, forcing them to raise deposit rates to retain savers.

Looking further ahead, interest rates are not merely a one-year or one-cycle issue. Vietnam has relied too heavily on bank credit to drive growth. The credit-to-GDP ratio is very high, while the banking system bears most of the economy’s medium- and long-term funding needs.

According to FiinGroup, continuing to place the full burden of growth on bank credit poses significant risks to financial stability. Banks are structurally suited to provide short-term capital, yet they often finance long-term projects, ranging from real estate to infrastructure.

When monetary policy reaches its limits

In this context, the State Bank’s credit growth target of around 15 percent for 2026 should not be seen as a tightening signal, but as a necessary deceleration. After a period of rapid credit expansion, the system needs to slow down to prevent risk accumulation.

According to Pham Xuan Hoe, a respected economist, the core issue at present is that monetary policy space has nearly been exhausted, with total outstanding credit already at around VND18.4 quadrillion.

Maturity mismatches amounting to trillions of dong leave liquidity risks constantly hanging over the banking system.

“When maturity mismatches become too large, interest rates are no longer a choice but a compulsory response to protect the system,” Hoe warned. 

As a result, he argued that for sustainable growth, Vietnam must shift focus to fiscal policy. In particular, revenue from land needs to be “locked” for infrastructure investment, creating long-term growth capacity instead of being used to offset regular spending.

Otherwise, the economy will continue in a state of “walking on one leg,” with bank credit bearing almost the entire medium-to-long-term capital demand.

So, the interest rate picture for 2026 is quite clear. Rates are unlikely to fall sharply, not because the economy lacks liquidity, but because the system’s capital structure has been stretched to its limits. Money remains in banks, but cheap money is no longer available as it once was.

Tu Giang