By Sucheera Pinijparakarn
Banks are taking a much more cautious approach to retail consumers with such tactics as increasing the down-payment percentage for mortgages on second or third homes and rejecting loans for weekend houses.
United Overseas Bank (Thai) will require an additional 10-per-cent down-payment for borrowers who buy a third home priced at Bt10 million or more, said Yuttachai Teyarachakul, executive director of personal financial services. Such home-buyers might represent investors or speculators, so the bank needs to require loan-to-value of 80 per cent, from 90 per cent normally, to defend against unexpected risks, he said.
“High-income people ensure the quality of debt, but we are also aware of some customers who buy more than one or two homes. Increasing the down-payment could ease speculation and [prevent a] bubble in the market,” he said.
However, the low unemployment rate is a clear indicator that retail banking is not affected yet by the slowdown in consumption.
UOB (Thai) reported outstanding mortgages in the first half of Bt76 billion, up by 7 per cent from Bt70 billion at the end of last year. The bank projects 14-per-cent growth this year by working with developers. About 60 per cent of mortgage customers buy in residential projects, so cooperating with developers helps ensure the quality of borrowers, he said.
TMB Bank prefers lending to first-home buyers to avoid any risks from speculators.
Kanchana Rojvatunyu, executive vice president, said the loan-to-value rate for second-home buyers was set at 70 per cent. The approval rate at TMB is only 30-40 per cent as its policy is to emphasise real-demand consumers – those who plan actually to live in their new home rather than use it as an investment.
She said the bank had no plan to grant mortgages for weekend houses.
Although several banks are focusing on higher-income people, TMB Bank looks at people who buy homes priced between Bt1 million and Bt2 million as these kinds of customer are “real” residents, she said.
Krungsri Consumer, the business unit of Bank of Ayudhya, has adjusted its “First Choice” business plan to deal with the consumption slowdown by increasing the number of First Choice outlets, said managing director Thakorn Piyapan. It had originally planned to add five First Choice outlets to the existing 26 this year, but “the expected slowdown in spending has led us to speed up the expansion of First Choice outlets to 21 … to acquire new customers”.
The outlets will be smaller and located in hypermarkets because their customers are high-potential spenders, he said.
First Choice is the only Krungsri Consumer brand that allows clients who have monthly incomes of Bt8,000 to apply for cash cards and instalment cards. However, the average income of First Choice customers is Bt30,000-Bt50,000.
Thakorn said the overall momentum of consumer finance was good, reflected by low rates of bad debt and delinquency. Still, Krungsri Consumer is closely monitoring consumers who have monthly incomes below Bt10,000 and the self-employed because this kind of customers will be affected by the increasing cost of living.