Bank of Ayudhya (BAY) has rolled out a fixed-rate mortgage of seven years at 5% interest to serve demand for locking in low borrowing costs for a longer term.
Apart from the seven-year fixed-rate package, the country's fifth-largest bank by assets is also offering housing loans at a fixed rate of 4% for five years, said executive vice-president Nathapol Luepromchai.
At present, other fixed-rate mortgage schemes in the market offer various periods of up to three years and interest rates around 4%.
Middle- and upper-income clients who want to buy houses priced at a minimum of 3 million baht are BAY's main targets for the five- and seven-year loan products, which will be offered exclusively to customers of six property developers: AP Thailand, Land and Houses, Quality Houses, SC Asset Corporation, Supalai and Pruksa Real Estate.
The bank's interest rates under the scheme are competitive, Mr Nathapol said.
"The longer-term fixed rate will help customers save financial costs amid rate-hike prospects from the end of this year to the beginning of next year," he said. "However, the bank doesn't focus on pricing strategy."
BAY aims to offer 2 billion baht in new mortgages under the scheme by year-end.
Mr Nathapol said competition for mortgage lending in the second half would intensify because of the improving economy and seasonal factors.
Moreover, some mortgage lenders that failed to meet loan growth targets in the first half are expected to unveil aggressive strategies to draw potential borrowers in the second half.
The campaign, however, is unlikely to prompt speculation in the property market, as banks have tightened loan approvals over the past few years.
Mr Nathapol said he was unconcerned about property investment by retail investors, as most of them have expertise, knowledge and ample money to invest.
BAY aims to raise its housing loan portfolio to 200 billion baht by the end of 2016 after hitting 180 billion, up 12.7% from the end of last year, in June.
It also hopes to keep non-performing housing loans at the current level of 2.6% this year.
According to the Bank of Thailand, mortgages for new homes fell by 36.3% month-on-month to 3,518 units in July on tepid demand for housing loans after the government's property stimulus expired and banks continued with their strict loan approval criteria.
Nonetheless, most property developers are upbeat as sales and transfers remain on target.
Saenphin Sukhee, managing director for residential development at SET-listed Golden Land Property Development, said the company's mortgage rejection rate of 32% makes no difference as long as sales are on target.
"Mortgage rejections are usual for the mass-market segment, as it is a large base," Mr Saenphin said.
He said the high mortgage rejection rates by financial institutions probably derived from high household debt affecting the lower-income segment.
The segment includes most buyers under the Pracha Rat low-cost housing scheme launched in the past few months.
"Most of those whose mortgage applications were rejected had insufficient income to get loan approval," Mr Saenphin said.