Thai central bank eases housing loan rules

 

FILE PHOTO: Apartment buildings are seen in Bangkok March 16, 2016. REUTERS/Jorge Silva

 

BANGKOK (Reuters) - Thailand's central bank relaxed mortgage lending rules slightly on Thursday to help some borrowers hit by tighter regulations introduced in April.

 

A co-borrower who is not the registered owner of a property will not be considered the borrower of that property, the Bank of Thailand said in a statement, adding that will help such a person get other loans.

 

The central bank, concerned about rising bad property loans and high household debt, in April imposed tightened mortgage lending rules, setting downpayments on home buying.

 

Strong competition among banks for mortgage business had led to looser lending for property purchases. Since the rule changes in April, growth in new housing loans has slowed, to 7.8% in the second quarter, compared with a year earlier, from a 9.1% increase in the first quarter.

 

Many people in Thailand take out a mortgage jointly with someone else as that makes it easier to get a loan.

 

Non-performing home loans amounted to 3.34% of total mortgage loans at Thai banks as of the end of June.

 

(Reporting by Orathai Sriring; Editing by Susan Fenton)

 

 

-- © Copyright Reuters 2019-08-16

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Sounds to me like Thailand's central bank wants properties to end up in foreclosure. Could it be that some people there got some nice new cars from property developers?

 

Let's say Somchai1 and Somchai2 each want to buy a property. If they would be alone they would not get the loans.

But with the changed rules, Somchai2 can co-sign for the property of Somchai1 and Somchai1 can co-sign for the property of Somchai2, which means both will get the finance for their property. Now the first thought might be that this is safer for the banks, because they have two guarantors.

But now imagine what happens if Somchai1 can't pay the rates. The bank wants the rates from Somchai2, who is most likely not able to pay as well, because he has to pay for his house already. So what will happen is that the bank will foreclose the house of Somchai1, but the selling price is probably not enough to cover the losses. Somchai1 might not have other assets, so what they will do is to go for the assets of Somchai2. If Somchai2 does not have any other assets, this means the house of Somchai2 will also be foreclosed.

 

So if people will make use of the changed rules as in my example, which some definitely will, this doubles the chance of a foreclosure, and it will involve two people and two houses, effectively resulting in a 400% foreclosure rate compared to giving a loan to a single person.

So exciting they can force Thais into heavier debt.

Is this part of the new stimulus Package ?.

More debt for more Thais, and the Central Bank is Lurching towards a possible recession.

1997 insanity all over again me thinks.

We don’t really care about new mortgage rules, BoT.  Just concentrate on cutting back on your hot money inflows that keep the Baht so high, and in turn drive the SET, exports, tourism and agribusiness lower every day.

Too little too late with a worldwide recession looming. Household debt has soared to nearly 80 percent of GDP - which means millions of families will be hung out to dry when the borrowing bubble bursts. Get ready for a glut of second-hand properties, cars and pickups.

 

If only more of us in these profligate times would heed the wise words of Dickens' Mr Micawber: "Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."