GSB to set aside 20 billion baht in housing loans for first-time house buyers



BANGKOK: -- The Government Savings Bank (GSB) has set aside 20 billion baht in housing loans to be lent out to first-time house buyers and also to house-owners who are in need of money for house repairs.

GSB director Mr Chartchai Payuhanavichai said Thursday that the housing loan programme which is under the Pracharath housing project would be proposed to the cabinet next week for consideration.

The terms of the GSB’s housing loan are as follows: the maximum amount of loan for each borrower is 1.5 million baht with interest rates ranging from 3-4 percent for the first six years which is 1-2 percent lower than the normal rate; the maximum repayment period is 30 years; there are no limits to the incomes of the borrowers but their debt burden must not exceed 50 percent of their incomes.

Mr Chartchai said that the housing loan project is based on first come first serve format and once the budget runs out the project will come to an end.

He disclosed that the government would compensate the GSB for the difference of the interest rate charged on the borrowers as the project was meant to support low income-earners to have houses of their own.

He expected about 20,000 borrowers to receive the loans averaging one million baht each.

The GSB director is confident that the housing loan project will not put the bank at greater risk because the loan terms are normal.

He assured that the loan project would not affect the bank’s liquidity problem as the bank has about 2.1 trillion baht in deposits. The bank, he said, can lend out up to 300-400 billion baht.

Source: http://englishnews.thaipbs.or.th/content/154522


-- Thai PBS 2016-03-11

The GSB director is clueless about how banks work.

Banks do not lend out deposits.

Bank liquidity comes from its mandatory durable investments (ie., treasury bonds), deposits and revenue (ie., loan fees, bank fees and loan interest). It is the revenue that makes bank profits.

What Prayut is doing is not only subsidizing the home interest rates but essentially guaranteeing mortgage payments (GSB is state-owned) so that high credit-risk people can get a bank loan or borrow from their household equity. Most would otherwise have too high household debts to qualify.

There will be little or no national impact on Thailand's GDP with this program other than potentially creating more household debt. The real estate sector will benefit from more home sales. The real intent of this program is more likely directed to achieving political support from low income-earners. This would be timely ahead of the draft charter referendum and national elections- especially if members of the NCPO, NLA and NRSA intend to run for public office.

Yes. Encourage more debt among those who cannot pay it back. Good plan.