Drop in mortgage overpayments

Some bank customers are now paying less to reduce their mortgages because they feel the need to build up a reserve against economic uncertainties and repairs in case their homes are damaged by floods.

Chatchai Payuhanaveechai, executive vice president of Kasikornbank, said yesterday that KBank’s housing-loan portfolio had increased only a little mainly on the reduction of loan overpayments. In the first nine months, KBank booked Bt36 billion in new home loans, while outstanding home loans climbed to Bt223 billion, beating the target of Bt220 billion.

Before seeing the reduction in overpayments, KBank had targeted Bt48 billion in new home loans and if it passed that goal, to sell the excess to Secondary Mortgage Corporation (SMC). 

In the past, once customers had been paying their mortgage instalments for about three years, they often opted to increase their instalments to get out of debt quickly, so total loans did not expand much.

But this year, some customers who were previously overpaying are just making their required instalments, so overpayments have declined by Bt300 million to Bt400 million a month.

Amid the opaque economic outlook, customers might want to ensure sufficient savings to deal with unexpected situations. 

KBank’s outstanding loans have a good chance of growing more than 8 per cent this year, above the target, Chatchai said.

Krungthai Bank has also found that customers who purchased residences priced under Bt3 million have cut down on bigger instalments.

Weidt Nuchjalearn, first senior executive vice president, said some customers in flooded provinces had asked KTB about the possibility of paying lower instalments so that they can repair their homes. 

“Housing-loan customers have consulted the bank about paying less principal but still paying the full interest. We have assigned staff to follow this kind of customer closely before helping them, in an attempt to prevent non-performing loans,” he said.

However, the flooding has not affected home-loan customers, he said.

Outstanding mortgages at KTB have risen from new loans rather than the reduction in extra payments. 

In the first nine months, KTB has drawn Bt70 billion to Bt80 billion in new loans while net loan growth was Bt40 billion to Bt240 billion.

KTB is considering unloading some housing loans to SMC after KBank and Siam Commercial Bank sold some performing housing loans to SMC.

Pikul Srimahunt, first executive vice president at SCB, said loan overpayments at the bank were unchanged, but defaulting customers who turned to be good credit customers had started delaying payments. They are small-business owners that may have lower income due to the economic slowdown.

Wichit Phayuhanaveechai, executive vice president at Bank of Ayudhya, said the reduction in extra payments for home loans was positive for banks in term of interest income and the stability of the loan portfolio. However, defaults are more important than overpayments.

The default rate has been improved after Krungsri changed its strategy to chase housing loans through 10 major developers. The approval rate has also risen to 60 per cent from 50 per cent.

Krungsri has raised its new-loan target after booking Bt26 billion in the first nine months. New loan bookings this year are expected to surpass Bt32 billion because the current quarter is the peak season for unit transfers, Wichit said.