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New home loans forecast to rise despite sluggish economy

Aug 04. 2015
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By Sucheera Pinijparakarn

The

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Despite the domestic economic slowdown, new housing loans in the banking industry this year should reach Bt600 billion, compared with Bt575 billion last year, thanks to low interest rates, stable residential prices and attractive campaigns offered by deve

Even though consumer-finance lending has witnessed slower growth, home loans in the first half enjoyed healthy growth, with outstanding mortgage lending in the banking industry reaching Bt3 trillion by June 30, from Bt2.89 trillion as of the end of March.

"The growth in housing lending reflects real demand and purchasing power, even though banks have tightened [lending criteria] amid the economic slowdown," he said yesterday.

The prospects for housing loans in the latter half suggest further expansion, with residential growth expected in the central zone of Bangkok and nearby provinces, he added.

Housing prices in those areas are high, resulting in the potential for mortgage-value expansion, he said.

The prevailing low interest-rate environment, coupled with limited housing supply, means developers have to compete intensively to secure customers, while property is a way of investment among people who have sufficient savings, all of which points to new housing lending this year being higher than in 2014, said Kitti.

An average of 2-per-cent non-performing loans in the residential mortgage industry, and a home-loan rejection rate of 20-30 per cent, are regarded as normal figures, said the president of the association.

However, people’s debt-repayment ability is in a great number of cases a negative factor for those wanting to access a home loan, he said.

The association and Home Buyer Guide yesterday announced the joint organisation of three annual events – "NPA & Resale Home 2015", "Home Loan & Consumer Credit 2015" and "Home Buyers’ Expo 2015" – which will run simultaneously from August 20-23 in a bid to enhance demand over the remainder of the year.

Special promotions

Six of the country’s banks will participate, offering special promotions to those interested in making a residential purchase.

Meanwhile, Siam Commercial Bank said a sizeable increase in the mortgage-application rejection rate at the bank had been found among SME (small and medium-sized enterprise) owners, rather than among salaried workers.

During the first half of the year, SCB’s rejection rate among SME clients increased to 34 per cent from 19 per cent last year, while the rejection rate among salaried workers rose slightly, from 15 per cent to 17 per cent.

The SME-related increase lifted SCB’s overall of rejection rate for housing loans in the first half to 23 per cent, against 20 per cent last year, said Pikul Srimahunt, the bank’s head of mortgage and small SME products.

The increased financial burden on borrowers has eaten into their debt-repayment ability, she said.

The biggest mortgage lender among the Kingdom’s commercial banks expects new housing loans to grow by 6 per cent this year, she added.

SCB targets new housing loans of Bt120 billion over the full year, having advanced Bt57 billion during the first half.

By year-end, its outstanding home loans should have increased to Bt570 billion, from Bt550 billion last year, said Pikul.

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