Think tank backs P690 hike in daily wages

IBON Foundation said it is proposing a P690 across-the-board increase in daily wages to bring worker pay more in line with the prevailing cost of living.

“The National Capital Region has the largest minimum wage of all regions at P610, but this is a bit more than half (51%) of the P1,197 living wage (for a family of five),” IBON said, citing the results of a study.

It said such an increase will address wage injustices and ensure that nominal wages keep pace with the cost of living, providing “substantial immediate relief” to workers and their families.

Federation of Free Workers President Jose Sonny G. Matula said: “Given the rising cost of living and ongoing inflation and the high rate of hunger as shown by the Social Weather Station survey, even a modest wage increase is critical.”

Renato B. Magtubo, chairman of Partidong Manggagawa concurred, but warned of possible negative effects on employers and the economy.

“The proposal will face enormous challenge(s) from employers. Economists also believe that a P690 wage increase would not be beneficial to the economy,” he said.

Mr. Matula countered that a wage increase can have “broad positive impacts” on the economy.

“By ensuring that more money remains in the hands of workers, we are not only supporting individual livelihoods but also fostering overall economic growth. Workers typically spend their earnings within their local communities, benefiting local manufacturers, producers, and the informal economy,” he added.

Between 1989 and 2023, while worker productivity  increased by 88% after adjusting for inflation, the minimum wage declined in real terms by over 22%, IBON study found.

IBON added that giving workers the equivalent of 50% of profits is “more than fair” given the years in which employers earned outsized profits while paying workers low wages.

Mr. Matula urged employers to share their profits and invest in a “stable, productive workforce.”

“This approach is not only beneficial for workers but also the economy, driving growth and prosperity across communities,” he added.

Wage increase bills are pending in the House of Representatives and the Senate, with proposals for increases ranging from P100 to P750.

“The proposal for a P690 increase in the minimum wage would greatly help workers and their families cope with the rising cost of living,” Mr. Magtubo said.

Meanwhile, another IBON study found that the real number of unemployed in February was 7.5 million, as opposed to the Philippine Statistics Authority estimate of 1.8 million in its Labor Force Survey.

“This estimate includes… the 3.8 million unpaid family workers who should not really be counted among those employed,” IBON said in its study.

It added the lack of jobs hits the younger generation the worst. IBON said in February, those aged 15-24 holding jobs fell to 6.2 million from 6.8 million a year earlier.

“This is concerning since youth employment is key in achieving the hyped demographic dividend, or when the increasing share of productive working-age population with higher incomes results in faster economic growth,” it said.

Source: Business World

Dictionary of bank loans

Understanding the jargon of home loans can be confusing, overwhelming and a wee bit frustrating at times.

But you don’t have a choice: if you’re bent to make the most out of your loans and savings, you will need to at least make an effort to fully understand these terms commonly used by your bankers and brokers.

This way, you won’t feel cheated or forced into taking that huge leap as you work on your dream home. Remember, ignorance is not and will never be an excuse—more so in this day and age when it’s much easier to do research and look up banking jargon via the internet, whether through your laptops, tablets or even mobile phones.

In the Philippines, banks have comprehensive websites that usually contain most of the information you will need to know before taking out a loan—the products and features offered, processes involved, requirements and even definitions of some terms you have to be aware of.

Here are some of the most common terms you’ll likely come across with once you start looking for the right banking partner that will suit your loan needs.

Home Loan

A home loan refers to a sum of money borrowed from a financial institution or a bank, usually for the purpose of buying a lot, a house and lot or a condominium unit. Some institutions offer home loans that can also be used for home construction, renovations, or even for the refinancing of an existing home loan.

PRINCIPAL OF A LOAN

The principal of a loan refers to the actual amount borrowed.

INTEREST RATE

The interest rate, mainly expressed as a percentage of the principal, is used to compute the amount to be paid for the money borrowed. It can also be regarded as the “cost of borrowing” money from the bank, and depends on prevailing market rates.

Borrowers usually prefer lower interest rates, but these are offered when the repayment period is shorter.

REPAYMENT

Repayment is the “act of paying back money previously borrowed from a lender. Repayment is typically executed through periodic payments that include part principal plus interest.”

TENOR OR REPAYMENT PERIOD

Tenor commonly refers to the time or period set for the repayment of a loan or until a financial contract expires.

Usually, a shorter tenor means lower interest rates. A longer repayment period fetches higher interest rates because of the belief that there is a greater risk involved, meaning there is a bigger chance that something might go wrong i.e., borrower not being able to complete all due payments.

INTEREST FIXING PERIOD

Financial institutions offer a way to keep your investments in real estate protected via an interest fixing period. This refers to the length of time you want your interest rate to remain the same despite whatever movements the interest rate may experience in the future.

This will allow you to protect your loans from market volatility and shifts in the real estate market. If there is a hike in interest rates anytime within the interest fixing period, the rate on your loan will not be affected.

The interest rate will only be reviewed and changed when the fixing period expires.

It’s still best to consult a bank home loan expert and to do your own research about the current economic conditions before deciding on your preferred fixing period.

COLLATERAL

Collateral is defined as “a property or other asset that a borrower offers as a way for a lender to secure the loan. If the borrower stops making the promised loan payments, the lender (bank) can seize the collateral to recoup its losses.”

The documentation to satisfy the collateral requirement can be: transfer certificate of title or condominium certificate of title and tax declaration (land, improvement, or condo unit. The bank may also ask for the following to evaluate the loan: contract to sell or reservation agreement if under developer tie up; and floor plan, bill of materials, or job specifications for house construction.

LOAN FEES

Remember, the cost of borrowing money from a bank does not end with paying the interest and the principal alone. There are other minimal fees that you should be aware of as well.

For home loans, these include fees for registration, notarial charges, appraisal, title investigation, handling, mortgage redemption and insurance.

Indeed, there are no shortcuts if you intend to be a well-informed home buyer and a responsible loan borrower. A little patience to go through all these minute details might prove to be more beneficial than you think in the long run.

Source: Inquirer

On interest due on housing loans

Housing loans account for a bulk of outstanding consumer loans in the Philippines.

In a study conducted by the Bangko Sentral ng Pilipinas in June 2020, the total amount of residential real estate loans (RREL) is the highest with P772 billion out of the P10.6 trillion, which was the total loan portfolio for consumer loans, including, among others, motor vehicle loans, credit card receivables and salary-based general-purpose consumption loans, under the Philippine banking system.

Nevertheless, nonperforming RREL—that is, where the borrower is usually 90 days past due in making any scheduled payments of principal or interest thereon—account for the highest percentage of nonperforming consumer loans (NPL) at P26.77 billion out of the total NPL of P232 billion.

Meanwhile, the nonperforming RREL account for 3.47 percent of the total RREL.

Settling a nonperforming RREL usually means paying the interest due. Take note, however, that under the Civil Code, interest shall be due only when it is expressly stipulated in writing.

Thus, in a string of cases involving the Philippine National Bank (PNB), the Supreme Court declared void the clause in its credit and housing loan agreements, which does not specify the applicable rates of interest.

Instead, this clause merely authorized the PNB to unilaterally determine and impose said rates and notify beforehand its borrowing clients of any increase.

According to the Supreme Court, this clause violates the principle of mutuality of contracts under the Civil Code. Pursuant to this principle, a contract must bind both contracting parties. Its validity or compliance cannot be left to the will of one of them.

This binding effect is premised on the following: that any obligation arising from a contract has the force of law between the parties; and that there must be mutuality between the parties based on their essential equality. Any contract, which appears to be heavily weighed in favor of the parties so as to lead to an unconscionable result, is void.

Meanwhile, as in the PNB cases, the borrower is not prevented from questioning the unilateral increase in the interest made by the lender despite repeatedly paying the imposed interest rates and renewing the loan several times.

In this regard, the Supreme Court declared that the borrower’s silence cannot be construed as an acceptance of the lender’s imposition of these rates.

If the borrower would pay interest when it was not stipulated, the provisions of the Civil Code on solutio indebiti or natural obligations shall apply. In this regard, the legal principle of solutio indebiti requires that if something was received when there is no right to demand it, and it was unduly delivered through mistake, the obligation to return it arises. Moreover, the lender who accepts an undue payment in bad faith shall pay legal interest thereon and damages, if applicable.

Meanwhile, where the law on natural obligations applies, the borrower does not enjoy a right of action for reimbursement upon proof that he voluntarily paid the interest. Interest may be paid in money or in kind. If it was payable in kind, its value shall be appraised at the current price of the products or goods at the time and place of payment.

As a general rule, interest due and unpaid shall not earn interest. Nevertheless, the contracting parties may capitalize the interest due and unpaid as an added principal by stipulating that it shall earn new interest.

Moreover, interest due and unpaid shall earn legal interest from the time it is judicially demanded—that is, from the time a claim is being filed in court, even when the disputed contract fails to stipulate the same.

In this case, the legal rate of interest shall be 6 percent a year to be computed from either judicial or extrajudicial demand as defined under Article 1169 of the Civil Code.

In one case, the Supreme Court held that this rate is an affirmation of the contracting parties’ intent—that is, by their contract’s silence on a specific rate, then the prevailing legal rate of interest shall be the cost of borrowing money, and which shall not be susceptible to shifts in rate.

Source: Inquirer