Three visitors examine deals at the House and Condo show in May 2024. Banks and developers say mortgage rejection rates are anticipated to remain elevated due to persistent global economic headwinds. (Photo: Varuth Hirunyatheb)

Mortgage rejection rates are anticipated to remain elevated due to persistent global economic headwinds, though eased loan-to-value (LTV) limits and lower fees may help support a recovery in the housing market, according to banks and developers.

Sunthorn Sathaporn, president of the Housing Business Association, said relaxed LTV limits could help stimulate demand.

After the government's relief announcement, bookings at the House & Condo Expo last month doubled to 12 billion baht, up from 6 billion in November 2024.

"The reduction in transfer and mortgage fees is anticipated to lift demand for units priced 7 million baht or lower," he said. "However, mortgage rejection remains an issue to watch."

He said homebuyers faced an average mortgage rejection rate of 40% in the fourth quarter of 2024. This figure rose to 45% in the first quarter of 2025.

The high mortgage rejection rate has led to overstock and backlog issues, with the absorption rate dropping to just 2% per month last year, meaning it would take more than four years to sell the remaining units.

Due to the mortgage rejection rate, many customers declined to proceed with unit transfers, affecting planning, investment and the expansion of the new projects.

Consequently, sales and revenue dropped significantly, while higher administrative costs worsened liquidity problems for businesses.

The association conducted its first survey on home loans among residential developers in Greater Bangkok in the fourth quarter of last year, which saw an average mortgage rejection rate of 40%.

The pricing segment of 1-3 million baht per unit had the highest rejection rate, ranging from 65-70%, followed by 3-7 million baht at 40%, and 7 million baht and higher at 15%.

In the second survey, conducted between April 1-7, among 22 developers -- including two SET-listed firms and 20 mid-to-small-sized ones, covering 272 projects -- the average mortgage rejection rate for the first quarter of 2025 rose to 45%.

Unit prices with the highest rejection rates were those below 3 million baht and between 3-5 million baht, which altogether accounted for over 90% of the total.

The top three reasons for mortgage rejections were poor financial history or issues with the credit bureau, high debt burdens and unstable income or lack of sufficient income documentation.

The most common issues for mortgage applications included strict bank criteria, credit and financial history problems, high interest rates, long approval processes, and complicated documentation and procedures.

Two days ago, the government announced a reduction in transfer and mortgage fees to 0.01% from 2% and 1%, respectively, for homes valued at 7 million baht or lower, effective until June 30, 2026.

"With this incentive, homebuyers can decide more quickly, but those facing credit issues still need to wait [for their credit to improve]," said Pannapat Srikirin, senior vice-president of the Bangkok Metropolitan branch department 1 at the Government Housing Bank.

She said risks from external economic factors have slowed Thailand's recovery, while soaring household debt and living costs continue to pressure purchasing power and housing affordability, and banks remain cautious about granting mortgage loans.

Last year, new home loans saw their sharpest drop in over a decade, falling 13.4% to 587.3 billion baht -- even lower than in 2019, which declined by 8.9% due to the implementation of LTV limits on April 1, 2019.