Mortgage queries line up

Commercial lenders taking pleas to BoT

Potential buyers scan a display of available houses at a Bangkok expo. Lenders are attempting to convince the Bank of Thailand to delay its planned mandatory slowdown of mortgage lending on Jan 1. (File photo by Pattarapong Chatpattarasill)

Commercial mortgage lenders plan to propose that the Bank of Thailand focus on curbing mortgage lending for third and subsequent home purchases, delaying stricter measures intended for a wider market that were to be implemented in early January.

The postponement is meant to allow mortgage lenders time to standardise lending guidelines, said a source in the banking industry who requested anonymity.

"Enforcement on Jan 1 is too soon," the source said.

Lenders also want the central bank to clarify if the measure applies to multiple mortgages or homes owned, the source said.

"Some homebuyers have multiple mortgages while others have paid off mortgages before taking out new mortgages to buy other homes. The central bank's measure is not clear," the source said.

The central bank earlier this month announced that mortgage lenders will be required to cap their loan-to-value (LTV) ratio at 80%, which means homebuyers will have to make a down payment of at least 20% on new homes worth 10 million baht and higher, as well as for second and subsequent homes.

Mortgage lenders can still extend up to 100% of home value to fund purchases of first homes valued at less than 10 million baht per unit. The lenders will also be required to limit mortgages and top-up mortgages such as personal loans and loans for mortgage-reducing term assurances (MRTA) at 80% of home value for second homes and those worth at least 10 million baht, and 100% for first homes valued below 10 million.

The measures are undergoing a public hearing process, which runs until Oct 22.

The new requirement comes after the central bank found that the financial system was showing signs of growing vulnerability in the property sector, given the increasing share of mortgage loans extended to borrowers for second or third homes, with deteriorating credit standards.

Almost half of new mortgages in the second quarter had an LTV ratio of more than 90%, and those with a loan-to-income (LTI) ratio above five times made up nearly one-third.

In the meantime, Thai Bankers' Association (TBA) secretary-general Kobsak Duangdee said after a meeting with members to discuss proposals on mortgage lending curbs that the association will propose common requests by banks, some of which are in line with property developers' proposals.

Property developers have requested that the central bank rein in mortgages for third and subsequent home purchases, delaying the measures planned to go into effect in January for an additional six months.

The proposals will be submitted to the central bank before the hearing is closed next Monday, Mr Kobsak said, adding that each bank can also propose specific requests to the policymaker.

The TBA's board is set to meet today to discuss the planned proposals, he said.

"I cannot tell what will be proposed as it isn't finalised yet," Mr Kobsak said. "Typically, stringent measures affect business operations but can help keep a lid on risk exposure. The central bank's measures will reinforce financial stability. Even so, some measures are one-size-fits-all but others depend on the risk appetite of lenders."


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