Delay in change to loan-to-value ratio unlikely to

The Bank of Thailand announced on Tuesday that the planned change in the maximum LTV ratio, from 100 per cent of the purchase price to 95 per cent, would be deferred from next year to 2013.
Siam Commercial Bank believes the purchasing power of home-buyers would return quickly if the government were to announce a waiver of mortgage fees, as was the case in the past two years.
Pikun Srimahunt, executive vice president and head of the Mortgage Business Division of SCB, said the housing market and housing loans next year are expected to be flat, or could even contract due to the flooding.
The delay of the new LTV ratio will affect the sentiment of buyers rather than boost purchases, she said.
Thakorn Piyapan, executive vice president at Bank of Ayudhya, said the delayed change would benefit the property market a little, but if the market and mortgages were to recover properly, the government must waive mortgage fees for home-buyers.
Moreover, he said the conditions of the first-home purchaser scheme should be adjusted by allowing non-first-time buyers to purchase a home, besides which the price of qualifying homes should be extended.
As regards the central bank’s decision on the LTV rule, he said only a relatively small number of buyers requested 100-per-cent loans from lenders, as most have the money to make a down payment. The delay in changing the ratio will not, therefore, help the market much.
The main concerns of lenders are the purchasing power of home-buyers and ongoing projects that have been damaged by flood water, he said.
“Many housing projects are in flooded areas, and even with a relaxation of the LTV ratio, we are not confident people would decide to buy in those projects,” he added.
Chartchai Payuhanaveechai, first senior vice president of Kasikornbank, said the postponement would boost home-buying by just 5 per cent. As a result, the housing market next year, previously expected to contract by 10-20 per cent, should now slow by 10-15 per cent.
He said the amount required for down payments was not great and most buyers had enough money in reserve to make such a payment. Therefore, the delay in the LTV rule change has no significant meaning for the market.
The Bank of Thailand has also temporarily reduced the risk weighting on loans for housing repairs to 35 per cent, from 75 per cent, in a move welcomed by the bank executives.