Mortgage customers eyeing long-term benefits, not just short-term zero rate

The borrowers realise that zero interest in the first year will ease the instalment burden only in the first year after which they will have to pay the higher rate in subsequent years, according to Bangkok Bank executive vice president Thaweelarp Rittapirom.

The zero-rate campaign is a gimmick of banks to attract customers, however, customers should find the best rates during the first three years before a floating rate in the remainder years or home borrowers will refinance in the fourth year. 

Kanchana Rojvatunyu, head of retail marketing, TMB Bank, said that the borrowers who applied for mortgage loans at zero rate in the first year at the fair have refinanced because they could not pay the higher rate.

Therefore, customers should study the actual rate for the long term to ensure they are able to pay the instalments for the loan period, she said. According to a survey at the Money Expo 2012, TMB Bank offers the lowest rate for home loans during the first three years among private banks at 4.22 per cent based on a credit line of Bt1 million to Bt5 million, followed by Krung Thai Bank 4.45 per cent and Bangkok Bank 4.55 per cent.

 

Loan rates   

Bangkok Bank is the only one offering a loan rate of 0.9 per cent for the first year at the expo, while other banks are offering zero rate from the first three month to 12 months.

Kasikornbank offers zero rate for the first 12 months, Thanachart Bank, Krung Thai Bank and TMB Bank provide zero rate for the first nine months, Siam Commercial bank (SCB) offers zero rate for the first six months and Bank of Ayudhya offers zero rate for the first three months.

Kanchana said the bank believes real demand would come from visitors seeking a good rate throughout the first three years.

TMB will focus on real demand customers at the expo, especially first jobbers who earn a salary of Bt15,000. TMB has entered the home-loan market in the past few years and therefore wants to woo real demand customers more than refinance customers.

The bank targets drawing new loans of Bt1 billion per month, while outstanding loans this year are expected to reach Bt55 billion.

Kasikornbank, the lender offering the longest loan period – a 50-year mortgage – expects the campaign to draw the interest of more customers.

Executives from many banks said that it is too early to comment on the 50-year loan plan, which will become the new benchmark for housing loans, replacing the 30-year loan because most borrowers don’t want to be in debt for a long period.

The Money Expo 2012, which kicked off yesterday, will run until Sunday. The organisers expect the expo to generate Bt12 billion transactions.