Thailand mortgages a rip off - 12% interest rates compare to 1% in Europe

[BEVUP]

I'll just throw this in

What if you owned the land & went for a loan to build a house on it, what % would you think ?

[Redline]

He may be exaggerating, but the higher rates are because many people do not pay back their loans in Thailand.  This raises the cost of doing business.  Still, it is good someone put it out there in the limelight.  Is suspected as much, so I asked the bank, and they verified my suspicions (for all of you who would like to refute me)

Edited July 20, 2018 by Redline

[DrTuner]

41 minutes ago, Redline said:

He may be exaggerating, but the higher rates are because many people do not pay back their loans in Thailand.  This raises the cost of doing business.  Still, it is good someone put it out there in the limelight.  Is suspected as much, so I asked the bank, and they verified my suspicions (for all of you who would like to refute me)

Checking the bank's for sale ads for foreclosed houses and the car sales for repo'd cars every few weeks will quickly show the situation. Thais will happily take whatever max credit they can get, spend it on some face gaining exercise and then default on the payments. At least they got to show off once.

Edited July 20, 2018 by DrTuner

[moontang]

11 hours ago, BritManToo said:

And no Thai bank is charging 12% interest on a home loan.

In other words, like all other Thai research/proclamations/announcements, complete BS.

Wonder what they will discover looking at plastic in the North Pole?

 

agreed, BS, and their numbers don't pass the sanity test.  At 8% you end up paying about triple, just off the top of my head....if you go the full 30.

 

at 8%..you pay 2.641 times the loan amount over30 years.  But consider land is up 1000% in BKK in 30 years.

[moontang]

5 hours ago, BEVUP said:

I'll just throw this in

What if you owned the land & went for a loan to build a house on it, what % would you think ?

depends on whether or not you could secure the construction loan with the land.  Building on cheap land is a losing proposition.  

 

At 12%..you would be paying back 3.71x, on a 30.

Edited July 20, 2018 by moontang

[Jonmarleesco]

14 hours ago, BEVUP said:

Well its' been 4yrs but I find 12 % a bit much - I was paying 9 % through a developer 

But I find Thais interest rates aren't what they mention

EG: A car at 2.5 % is actually 5% 

 

Forgot to mention : It has to do with internal forces

Europe is going down the drain hole, so they lower the rate for people to spend.

But the Thai Gov is spending bucket loads & keeping their currency

 

'I find Thais interest rates aren't what they mention EG: A car at 2.5 % is actually 5%'

 

Because interest rates are compounded, and usually on a daily basis. 

[moontang]

7 hours ago, Jonmarleesco said:

'I find Thais interest rates aren't what they mention EG: A car at 2.5 % is actually 5%'

 

Because interest rates are compounded, and usually on a daily basis. 

makes minimal diffetence.  Loans are calculated monthly, as are your payments.  Revolving credit is calculated differently, but of little consequence if you pay it monthly.

[Vacuum]

23 hours ago, BritManToo said:

SCB, TMB and BKB charge 6%.

Where does he get 12% from?

You can add GSB (Government Savings Bank) to the list.

[greeneking]

Elsewhere 'Thai banking shares climb as big four's earnings beat estimates.'

Co-incidence?

Even loans secured on property are high while the banks are borrowing at very low rates. Or even nothing at all if you are a foreign depositor.

[JohnThailandJohn]

Clearly Thailand doesn't need these low interest rates to keep housing sales where they want

[Redline]

16 hours ago, DrTuner said:

Checking the bank's for sale ads for foreclosed houses and the car sales for repo'd cars every few weeks will quickly show the situation. Thais will happily take whatever max credit they can get, spend it on some face gaining exercise and then default on the payments. At least they got to show off once.

Exactly 

[Neeranam]

6 hours ago, Vacuum said:

You can add GSB (Government Savings Bank) to the list.

And KTB, my mortgage is about 7%

[Retiredandhappyhere]

So, loans are available at around 6% in Thailand, whereas, for Visa purposes,  they hold thousands of expats' long-term investments of at least 800,000 bahts each, for which they pay interest of around 1.5%

We fully understand that they are in the business to make a profit, but that margin could be a lot less if only the banks were more careful in vetting potential borrowers to ensure that their earnings are sufficient to justify the loan.  It would seem that teachers are a case in point.

 

[moontang]

1 hour ago, Retiredandhappyhere said:

So, loans are available at around 6% in Thailand, whereas, for Visa purposes,  they hold thousands of expats' long-term investments of at least 800,000 bahts each, for which they pay interest of around 1.5%

We fully understand that they are in the business to make a profit, but that margin could be a lot less if only the banks were more careful in vetting potential borrowers to ensure that their earnings are sufficient to justify the loan.  It would seem that teachers are a case in point.

 

hence the problem:  mortgage rates are low, but only unqualified need one....CIMB is doing 1.75% for 18 months.

[Sir Dude]

My last interest readout on the last pink slip for house mortgage payment from SCB was 5.37%...so would be nice to see where these figures are coming from.

Edited July 21, 2018 by Sir Dude

[Monomial]

In Bangkok and the major cities it is usual to get an actual mortgage where the interest rate is a true APR. These are usually in the range of 6% - 7% (after the teaser rate) for anyone with decent credit.

 

In the rural areas however, it is a common problem that people want to build their own house using their cousin as a contractor. These people are unable to fulfill the requirements of the bank for a proper mortgage/construction loan because the contractor can't produce the required paperwork and plans. For these instances, people usually wind up with a personal loan secured by property. And yes, the interest rate is substantially higher. 12% is very believable. So the Thai researcher is being a bit disingenuous with his statements. The problem is primarily the inability of rural Thai builders to comply with professional norms in construction, not really the banks.

 

I have never seen anyone, even those with horrific credit, actually get a genuine mortgage at 12%.

 

This is an entirely different problem than the hire purchase interest on things like cars. These are quoted as simple interest, not APR. So when your car loan says 3% over 4 years, they simply take the price of your car and multiply by 12%. That is the interest you pay, and it usually works out to about twice the amount when calculated as an actual APR.

 

[cyberfarang]

And most Thai bank savings interest rates are 1%, 15% tax deductible.

 

Welcome to the corrupt banking systems.

 

 

[InfinityandBeyond]

Pay cash or rent. Debt is slavery. 

[Dene16]

On 7/20/2018 at 3:47 AM, worgeordie said:

Just checked UK rates,1.70 % as an offer to start then

rises to 3.70 % which is the real rate.

1.7% is about right i pay 2% and renew it every 2 years on another offer so it always stays around that rate and has done for the last 8 years. As long as people don't get fixed rate etc for x amount of years, that's  all people should pay. 

[rickudon]

Yes, the professor was pushing the bounds a bit with his claims. My Thai family pay 6% mortgage (secured on land).

 

Cannot say about mainland Europe, but in the UK the long term rates are about 3.5%, lower rates are usually teaser rates with limited duration (usually 1-3 years) after which revert to standard rate. If you are a good credit risk easy to swap to another cheap fixed rate, but they hope you don't. Also many cheap fixed rates come with fees which needs to be factored in as to how much you are actually paying. The UK is a very competitive market, banks and building societies always trying to lure customers in, but if you need to borrow a high percentage of the house value, a larger percentage of income amount or are a higher credit risk can easily pay 6% also.

 

The Thai market is not so competitive and harder to get discounted rates, not as well regulated either. Should be better information for customers and better rates - the Thai banks operate more like a cartel keeping their prices up.

[thaiclan]

On 7/20/2018 at 9:47 AM, worgeordie said:

I cannot believe any bank in the West is giving mortgages at

1%,where is the profit in that,even if they gave 0 % interest,

still not even enough to cover the risks for the Banks.

 

Just checked UK rates,1.70 % as an offer to start then

rises to 3.70 % which is the real rate.

regards Worgeordie

The profit is not from the customers repayment of capital or interest.

The profit comes from Central Bank.  Money is created (printed) when a debt has been incurred (fractional reserve currency) at a rate of anywhere from 8-12 times the debt amount.
So whilst family friendly banks are just oh so willing to let you have 1% or so mortgages to help you and your family (SARC) the real profit is they can take that debt (proof of confidence in the market) and Central Bank will give them 8-12 times the amount back onto their books.

So your 200k mortgage is worth around 2 million to the bank.  Much more than the customers meagre repayments!