KBank trims mortgage rate to maintain share

“Medium-sized banks have become the spotlight for us since they have offered pricing to maintain their ranking,” Chatchai Payuhanaveechai, executive vice president of KBank, the fourth largest by assets, said yesterday.
The bank wants to restructure interest rates for home loans after the Monetary Policy Committee cut the policy rate by 25 basis point to 2.5 per cent on May 29, he said.
The interest rate for the first three years of a mortgage loan at KBank will be the lowest among mortgage lenders in the commercial banking industry.
The current interest rates for the first three years is between 2.50 per cent per annum to 5.50 per cent. The cutthroat pricing by medium-sized banks is making it more difficult to acquire new mortgage customers, so the bank considered cutting its own rates.
However medium-sized banks like Bank of Ayudhya have not changed their fixed-rate mortgages. BAY believes its pricing strategy, especially the MLR-2.0 and MLR-2.1 throughout the contract, is sufficient to compete with rivals.
The interest rate is 5.275 per cent per year throughout the contract. This campaign is designed for customers who don’t want to refinance, said Wichit Phayuhanaveechai, executive vice president of BAY.
Each bank has its own cost structure.
Even though BAY has not cut its fixed rates yet, its current programmes designed for each segment are attractive, he said.
Krungthai Bank, the second largest bank and the second largest mortgage lender, has no plan to cut mortgage interest rates, as its current packages are attractive, said Weidt Nuchjalearn, a senior executive vice president.

LOW MARGIN
Pricing is not a way for KTB because the margin on housing loans is low. The bank expects to post new loans of Bt30 billion in the first half. In the second half, KTB plans to draw new housing loans of Bt50 billion to offset repayments, so net new loans this year should reach Bt40 billion and outstanding loans Bt250 billion.
KBank expects new loans of Bt49 billion this year, of which Bt22 billion has already been booked in the first six months. Outstanding loans are projected at Bt223 billion this year.
KBank is defending itself against speculation in the residential market from customers who borrow to buy a third property by requiring a higher down payment of 15 per cent.
The bank will no longer grant credit to customers buying a fourth residence. Fourth residences currently represent 4 per cent of outstanding loans of Bt215 billion.
The approval rate at KBank is still 65 per cent because the major customers are those earning a monthly income of more than Bt30,000. The rejection rate comes from customers carrying a high debt burden of more than 40 per cent of monthly income.
KBank yesterday launched digital home loans. It is the first bank to allow customers to check pre-approvals and credit line approvals over the Internet via a PC or smartphone.