Krungsri offers long-term fixed-rate loans
BANK OF AYUDHYA, trading under the Krungsri brand, has pioneered a long-term fixed-rate loan package targeted at mid-to-high-income homebuyers, as they are sophisticated consumers.
Nathapol Luepromchai, executive vice president of the mortgage division, said yesterday that from the bank’s research, interest rates were expected to turn upwards.
Residences are one of the investment choices for mid-to-high-income earners.
If any bank plans to follow Krungsri’s lead in the new segment, it is a normal competitive move in the banking industry.
Housing loans are long-term loans. Sophisticated consumers who know the upward and downward trends of interest rates can predict the financial cost of buying a residence. They might want to lock in their financial cost for the long haul.
The bank has responded by developing a special loan for customers of six top developers – AP (Thailand), Land and Houses, Quality House (Q-House), SC Asset, Supalai and Pruksa Real Estate.
The loans carry fixed interest rates of 4 per cent for the first five years and 5 per cent for seven years.
However, it might prove difficult to educate the general public about the new product because they have preferred short-term interest rates.
Customers who know about the long-term fixed-rate product must be familiar with investment and not consider just pricing.
Normally, commercial banks offer a fixed rate of nearly 4 per cent for the first three years.
Krungsri is offering the programme to mid-to-high-income customers who plan to buy a home priced at more than Bt3 million. If the bank receives good feedback, it will consider keeping the programme.
The bank targets Bt2 billion in new loans from the programme this year.
The long-term fixed-rate programme is one of Krungsri’s key campaigns this half of the year aimed at sustaining growth momentum.
The bank will start expanding its footprint in the housing-loan market in main cities by partnering with big local developers.
It will aggressively promote its Home for Cash product to help support sales at Krungsri branches. However, Home for Cash is in the beginning phase.
The bank considers that it should help another funding source to startups.
In the first half of this year, Krungsri’s housing loans beat the market after it adjusted its processes and designed unique products to deal with developers.
The bank’s housing loans expanded by 95 per cent to Bt34 billion, while the market added only 5.6 per cent of new loans, reaching Bt290.89 billion.
Krungsri’s outstanding loans spurted 12.7 per cent to Bt180.48 billion, against 4 per cent for the market.
Krungsri projects its new housing loans to soar again this year by 30 per cent to Bt65 billion, and outstanding loans by 25 per cent to Bt200 billion.
By housing loans, Krungsri ranks fifth, but by new loans it is third.
Housing loans are the main product of retail banking at Krungsri. Home loans are a basic financial product for forging a long-lasting relationship with consumers.
The division aims to write new loans of Bt50 billion to Bt70 billion a year, which are suitable figures, Nathapol said. The risk is also acceptable for the fifth-largest bank.
“We want to maintain the NPL [non-performing loan] ratio at 2.6 per cent,” he said.
