Banks shun zero-rate home loans

Banks are desisting from strongly promoting zero-rate mortgages at the 13th Money Expo, which began yesterday, after the Bank of Thailand sought their help in fending off a housing bubble.

Zero-interest home loans have been a strategy used by banks to lure visitors but those participating in the expo should heed the BOT’s advice and desist from this practice even though mortgages are their leading product, said Chatchai Payuhanaveechai, executive vice president of Kasikornbank.

KBank used to promote zero-rate mortgages at the Money Expo but at the current one, KBank is offering 0.2 per cent for one year instead. The campaign is available to the first 10 customers at the four-day event from yesterday until Sunday.

He said the BOT did not want commercial banks to stimulate the housing market with zero-rate loans as this might spur speculation. KBank will not promote such loans outside the fair either, he vowed.

However, Chatchai said mortgages would still be the product that banks must promote at the event as housing loans are a cross-leading product that could help banks sell other financial products.

 

Alternative offers

Siam Commercial Bank (SCB), the largest mortgage lender among commercial banks, is not offering zero-rate home loans at the fair but is offering free air tickets to customers who apply for a housing loan at the event instead.

SCB president Kannikar Chalitaporn said the bank’s decision not to offer zero-rate housing loans was part of its effort to the change the format of its marketing campaign. Also, zero-rate was not the primary choice for visitors at the fair.

“The visitors at the previous Money Expo wanted services and financial solutions as a priority. Therefore, the campaign of banks at the fair should be in line with the requirements of customers,” she said.

SCB executive vice president Pikul Srimahunt added that the bank had scrapped zero-rate deals both at the Money Expo and at its branches, including exclusive campaigns with property developers.

Bangkok Bank executive vice president Thaweelarp Rittapirom said BBL was offering 0.9 per cent for six months at the event, saying the bank had never launched zero-rate mortgages at the expo or at its branches. He said the warning from the BOT should be heeded.

However, two state-owned banks – Government Housing Bank and Krungthai Bank – are offering zero-rate housing loans for eight months at the expo, which is the longest term among the exhibitors.

KTB will not strongly promote the package in deference to the suspected bubble in the housing market, which is being monitored by the regulator, said Weidt Nuchjaalearn, KTB senior executive vice president.

He said zero interest needed to be offered to visitors at the fair as a gimmick to lure retail consumers to know the products offered by the bank.

KTB is targeting Bt3 billion in housing loans during the four days.

Thanachart Bank and the Government Savings Bank are providing zero interest for six months and Bank of Ayudhya is offering it for three months.

Philip Tan, president of BAY, said that offering zero-interest loans did not mean the bank was driving the bubble. It is a strategy to convey that the bank wants to offer real value to customers.

He said the bank respected the signal BOT has sent to commercial banks and added that the bubble was a worry for BAY as well. However, despite the zero rate, BAY is not relaxing loan conditions and customers have to compare the benefits that they will receive from the promotions. “We just offer the benefit to real customers, only at the fair. Outside the fair, we will not promote zero rate except zero-rate commitments with property developers.” 

In terms of fund products, term deposits with high interest rates remain the most attractive products.

The Bank for Agriculture and Agricultural Cooperatives is offering the highest interest rate for time deposits – 5 per cent for a five-month fixed deposit. The minimum investment required is Bt50,000. 

The Industrial and Commercial Bank of China (Thai) is offering 3.6 per cent for its eight-month fixed deposit; the minimum deposit is Bt100,000. KTB is promoting 3.33 per cent for its 18-month fixed deposit and 3.77 per cent for a 47-month fixed deposit. Kiatnakin Bank is offering 3.25 per cent for its five-month fixed deposit.

The Government Savings Bank is promoting 3-per-cent for its nine-month current account. 

The Money Expo organiser expects total transactions of more than Bt90 billion during the four days, lower than the Bt121 billion at the 12th Money Expo last year.