Thai central bank adjusts housing loan rules, effective in April

 

FILE PHOTO: The Bank of Thailand logo is pictured in Bangkok, Thailand, August 5, 2016. REUTERS/Chaiwat Subprasom

 

BANGKOK (Reuters) - Thailand's central bank, concerned about rising bad property loans, on Friday announced some changes to new planned mortgage lending rules and delayed an effective date for three months to April.

 

Last month, the central bank said it would require buyers of homes worth more than 10 million baht ($302,846) and of second homes to make down payments of at least 20 percent.

 

But after a hearing, the Bank of Thailand will require buyers of first and second homes worth more than 10 million baht to make down payments of at least 20 percent, Assistant Governor Jaturong Jantarangs told a briefing.

 

Buyers of second homes worth less than 10 million baht will have to make downpayments of at least 10 percent if their first homes have been paid for at least three years, otherwise a downpayment of at least 20 percent will apply.

 

Buyers of third homes, regardless of prices, will have to make downpayments of at least 30 percent.

 

"From the feedback we've got, there is a concern about adjustments of affected groups, and some say second homes are not always for speculation. It's real demand," Jaturong said.

 

The new rules comes amid elevated household debt and rising bad mortgage loans. Intensifying competition among banks for mortgage business has led to looser lending for property purchases.

 

Housing loans rose 6.2 percent in the end of the second quarter from a year earlier, while non-performing mortgages hit 3.39 percent of the total, the highest level since the end of the global financial crisis in 2009.

 

(Reporting by Kitiphong Thaichareon; Writing by Orathai Sriring; Editing by Kim Coghill)

 

-- © Copyright Reuters 2018-11-09

How stupid. It might be 'real demand' but the purchaser has the same amount of money no matter how many homes they are buying.

 

It really shouldn't be up to the government. Funny that... Thailand.

 

They have to have these rules because everyone's finances are so opaque.

 

I wouldn't loan money to have of Thailand because they are broke. I wouldn't loan money to the other half because they can barely service the loans they have now.

Recent financial results of Thai banks give the impression of being hale and hearty, despite the Central Bank's misgivings on the level of NPL's. It is highly likely that the CB will be aware of the banks massaging their NPL rates so that cost provisions are not forced on them with a consequential impact on profits. Perhaps this is one of the reasons why CB are taking such action.

There should be more review / control of interest rates (spread reduction measures) plus the widespread practice of loading commissions on to borrowers, who are likely to be borderline on being granted loans and thus more likely to eventually move into the NPL column.