Taiwan Holds Its Discount Rate at 2 Percent and Lifts the Second Home Loan Cap to 70 Percent
Taiwan’s central bank left its policy rates unchanged on 17 September and loosened its property rules. The discount rate stays at 2 percent, where it has been since 22 March 2024. From 18 September, however, an individual buying a second home can borrow up to 70 percent of its value, up from 60 percent. The board also raised its 2026 growth forecast to 11.48 percent after the economy grew 14.15 percent in the first half.
The rate stays, the property curbs ease
The rate on secured accommodation stays at 2.375 percent and short term accommodation at 4.25 percent. The board said inflation is under control this year and should fall back below 2 percent in 2027. It pointed to uncertainty over the global outlook and the possible effect of the Middle East conflict on Taiwan’s prices and economy. Since its June meeting, the release notes, the European Central Bank has raised rates twice, the Bank of Japan has resumed increases, the Federal Reserve has turned to raising rates and the People’s Bank of China has kept easing.
The easing came through selective credit controls. Real estate loans made up 34.44 percent of total bank lending at the end of July, down from 35.56 percent at the end of March and 3.17 points below the recent peak of 37.61 percent in June 2024. The bank also dropped a rule, in place since December 2021, that required land loan borrowers to commit to starting construction within a set period. Loans for company home purchases, high value homes, third homes and unsold housing stay capped at 30 percent.
| Loan type | Cap before 18 Sep | Cap from 18 Sep |
|---|---|---|
| Second home, individual | 60% | 70% |
| Third home or more | 30% | 30% |
| High value home | 30% | 30% |
| Company home purchase | 30% | 30% |
Loan to value ceilings under the central bank’s rules on real estate mortgage lending. Land loans stay at 50 percent with 10 percent reserved for construction; only the pledge to start construction within a set period was removed.
Where 2 percent sits
The last cycle ran from March 2022 to March 2024 and took the discount rate from 1.125 percent to 2 percent in 6 moves, 0.875 percentage points in all on our calculation. On our reading of the bank’s history table, 2 percent is the highest level since the bank cut from that rate on 8 January 2009.
| Decision date | Discount rate | Change |
|---|---|---|
| 18 Mar 2022 | 1.375% | +0.250 |
| 24 Mar 2023 | 1.875% | +0.125 |
| 22 Mar 2024 | 2.000% | +0.125 |
| 17 Sep 2026 | 2.000% | Held |
The table lists selected steps. The cycle also included moves in June, September and December 2022. Changes are in percentage points.
The rate now sits just below the bank’s inflation forecasts. It expects consumer prices to rise 2.03 percent this year and core prices, which exclude fruit, vegetables and energy, 2.16 percent. On our calculation that leaves the discount rate 0.03 points below its own headline inflation forecast and 0.16 points below the core forecast. Prices rose 1.84 percent on average from January to August, and core prices 2.11 percent.
A forecast above the average
The bank’s 11.48 percent forecast is 0.43 points above the 11.05 percent average of the 15 forecasts in its table, which includes its own, on our calculation. The bank also raised its second half forecast to 9.09 percent, on our calculation about 5 points slower than the 14.15 percent of the first half. For 2027 it expects 5.82 percent, well below this year’s pace, which it attributes to the high base.
| Forecaster | 2026 growth | 2027 growth |
|---|---|---|
| Central bank, 17 Sep | 11.48% | 5.82% |
| DGBAS, 14 Aug | 11.05% | 6.04% |
| Average of 15 forecasters | 11.05% | 5.26% |
DGBAS is Taiwan’s statistics agency. The average covers the 6 domestic forecasts, including the central bank’s, and 9 foreign forecasts listed in the release.
Credit is growing faster than money. Bank loans and investments rose 8.23 percent on average from January to July against 6.60 percent for M2, a gap of 1.63 points on our calculation. The bank links the credit growth to working capital demand from AI related industries and to heavy stock market trading.
Why it matters: Taiwan is keeping its interest rate on hold while easing targeted property lending rules, separating the two tools. On our reading, the fall in real estate’s share of bank lending to 34.44 percent gave the bank room to relax credit controls without changing the discount rate.
Outlook: The bank said it will keep reviewing its credit measures and adjust them as needed. It named domestic inflation, how far major economies tighten, domestic financial conditions, the AI outlook, US trade policy and extreme weather as the factors it will watch in adjusting monetary policy.
Sources: Central Bank of the Republic of China (Taiwan).
