Bank of China (Thai) has jumped on the mortgage rate bandwagon in a bid to boost its housing loans by five times this year.
Pricing is a main strategy to draw homebuyers to use the bank's mortgage services for both new loans and refinancing, said Phonpimol Pathomsak, senior vice-president for personal credit.
The bank, on average, is offering an annual interest rate of 5% for new and refinanced loans throughout the term of the loans, well below the market's average rates of 6.2% and 6%, respectively.
Bank of China waivers for mortgage-related fees are also available in promotional campaigns.
Amid swelling family debt and economic uncertainty, local banks are racing to lend secured loans such as mortgages, especially refinancing.
CIMB Thai Bank this month launched a balance transfer refinance programme for those who have had home loans from other banks for at least three years. It offers an average 4.67% interest rate for the first three years and an average of 5.77% throughout the contract.
It also waives a 1% pledging fee, stamp duty and appraisal fee.
The Thai unit of the Bank of China hopes to see its outstanding mortgages grow to at least 1 billion baht this year, soaring five-fold from its current portfolio, Ms Phonpimol said.
She said the bank planned to raise its refinance mortgage ratio to 40% this year from 30%.
New mortgages now account for 70% of the bank's home loans.
The Chinese bank entered Thailand's mortgage sector in the fourth quarter of 2013. It has operated in Thailand for 22 years, with a focus on corporate banking. It branched out into retail banking in the Thai market five years ago, starting with credit cards.
"We have lower operating costs than other local banks," Ms Phonpimol said. "Our small number of branches and staff is a key factor allowing us to adopt an aggressive pricing strategy."
The Bank of China has three branches in Thailand and plans to open new ones gradually in Bangkok and upcountry to comply with Bank of Thailand regulations permitting foreign commercial banks' subsidiaries to open up to 20 branches nationwide.
Foreign banks that have not been granted a subsidiary licence may only open three branches.
In addition, foreign banks with subsidiary licences from the Bank of Thailand are allowed to offer 20 off-premises ATMs nationwide.
The Bank of China expects to open more branches soon, and this could support the bank's long-term mortgage growth.
All of its mortgage borrowers are Thai upper-income earners with average earnings of 200,000 baht a month and credit lines of 6-7 million baht. It offers a maximum credit line at 80% of the home price.
With its strong risk management and high-income customers, the bank is now free from non-performing housing loans.
The Bank of China is one of China's four state-owned commercial banks.