Home loan slump worries officials

Housing project details on display at Money Expo 2019. Patipat Janthong

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The Finance Ministry is poised to ask the Bank of Thailand to ease new mortgage lending curbs following a considerable slump in housing loans after the curbs took effect in April.

"The ministry plans to discuss relaxing the curbs with the central bank because the real estate supply chain has been wiped out," said GH Bank president Chatchai Sirilai. "GH Bank has already reported the impact [from tighter mortgage lending rules] to the Finance Ministry."

The central bank's new loan-to-value (LTV) requirements are slowing home loans, he said.

Loans extended by GH Bank fell last month, though the extent of the slump that was caused by the new mortgage curbs is unclear because April had many holidays, Mr Chatchai said.

The bank wants to digest whether weaker loan demand was due to the cooling economy, he said. The lender will reassess the situation later this month.

Starting on April 1, homebuyers were required to make a minimum down payment for third and subsequent mortgages of 30% of the home price, with second mortgages set at 10-20%, depending on how long a borrower had made payments on the first one.

The LTV ratio of 90-100% remains unchanged for those who apply for a first mortgage to buy a home priced below 10 million baht, but the ratio is lowered to 80% in cases where a borrower buys a residence valued at 10 million baht or higher.

An executive from the Bank of Thailand said recently that the regulations may be tightened further or relaxed, depending on the outcome after implementation.

The stringent home loan regulation is aimed at preventing bad home loans, improving credit standards and preventing speculative activities, the central bank said.

"We don't know whether lower lending in April stemmed entirely from the central bank's tighter regulations, but the shortened month would see loan demand dwindle," Mr Chatchai said. "We need to evaluate again. Our loan target of 203 billion baht this year could fall short if sluggish loan demand results from the requirements."

GH Bank lent about 9 billion baht in April, far below the average loan target of 15 billion baht a month, he said.

The bank expects to approve 90 billion baht worth of mortgages in the first half, though the official target is set at 100 billion baht.

GH Bank extended 11.7 billion, 13 billion and 19.8 billion baht worth of housing loans in January, February and March, respectively.

Mr Chatchai said the bank lent 4 billion baht to more than 5,000 borrowers under the government's low-cost 1-million-home scheme.

GH Bank must complete scrutinising 127,000 loan applications under the budget home scheme within the next two months, he said.

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