Thursday, November 14, 2019

Mortgage loans affected as LTV rule bites

Aug 02. 2019
Photo by The Nation
Photo by The Nation
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By Somluck Srimalee
The Nation

1,592 Viewed

Rejection of mortgage loans by commercial banks have risen by up to 50 per cent following the Bank of Thailand (BOT)’s reduction in loan to value or LTV that became effective on April 1, 2019, property developers say.

LPN Development’s chief executive and managing director Opas Sripayak noted that its customers have reported increased rejections when applying for mortgages from the banks since the introduction of the new measure that restricts loans to 90 per cent for the first home, 80 per cent for the second home, and 70 per cent for the third home.

“According to the new LTV rule, people wanting to buy a residential property priced at Bt1 million have to put down Bt100,000. This is hard for lower income people who do not have sufficient savings for the down payment,” he said.

AP (Thailand)’s Pamorn Prasertsan said that the between 25 and 35 per cent of the company’s customers face rejection when applying for mortgage loans depending on the project site, five per cent more than before the LTV came into effect.

“We suggest to our customers how they should go about applying for a loan and also ask the banks to give them advice,” he said.

Pruksa Holding reveals that its presales dropped by up to 25 per cent between April and June as a result of this new policy. Rejection of mortgage loans is around 40 per cent, up eight per cent from pre-policy days, the company’s deputy group chief executive officer Supattra Paopiamsap said recently.

Government Saving Bank’s president Chatchai Phayuhanaveechai accepted that the bank rejection mortgage loan rate has increased about five per cent to around 30 per cent. 

“We try to help customers by recommending they open savings accounts and put aside money before buying a residence as this provides the bank with a financial record on which they can make a decision to approve a loan,” he said.

Kitti Pattanapongpibul, president of the Housing Finance Association, noted that growth in house ownership was unlikely to exceed five per cent following the BOT’s implementation of the new LTV measure, down from eight per cent last year.

However, the first half of 2019 showed a 38-per-cent rise in mortgage loans as homebuyers rushed to transfer their residential projects in the first quarter before the LTV became effective. The second quarter revealed a 10-per-cent drop in loans compared to the same period of last year.

Meanwhile, non-performing-loans recorded 1.53 per cent in the first half of this year, he said.

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