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Banks using ‘house for cash’ to evade LTV

Sep 02. 2019
Natthaphol Leuphromchai
Natthaphol Leuphromchai
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By The Nation

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Commercial banks have shifted their strategy on homebuyers’ loans to introduce a “house for cash” approach that ease the impact of the loan to value (LTV) ratio recently set by the Bank of Thailand.

Orn-Anong Udomkantrong, assistant managing director at CIMB Thai Bank, said the LTV ratio that went into effect in April essentially limits the amount of money borrowers can get to buy property.

But a “house for cash” loan, to which the LTV does not apply, lets borrowers use a second, debt-free residence as collateral.

“CIMB Thai is among the pioneers in this,” she said. “We have gradually reduced our interest rate from 6 to 4.29 per cent for customers with Bt100,000 income and up and 4.74 per cent for customers earning Bt30,000 or more.”

The bank’s property-loan portfolio grew from Bt5.9 billion in value to Bt6.3 billion in July and is expected to reach Bt7 billion by year-end.

Natthaphol Leuphromchai, who has the same post at Bank of Ayudhya, said it had offered “Home for Cash” for years. “Most of these borrowers have a good credit history,” he said. “Currently the bank grants loan amounting to 70-80 per cent of collateral value at an interest rate of 6-7 per cent.”

Natthaphol acknowledged that competition is strong in the “house for cash” market since banks want to lower their interest rates to attract more customers, but he is sure his bank can cope.

“Our Home for Cash loan has steadily gained more attention and we should have no problem reaching our target, while Bank of Ayudhya overall property loans should reach Bt66 billion by year-end.”

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