State will offer mortgage insurance for riskier debtors

The Finance Ministry is set to provide a mortgage insurance service allowing low-income or non-salary earners to seek housing loans.

Two state-owned financial institutions _ Thai Credit Guarantee Corporation and Secondary Mortgage Corporation _ will provide the service, said Areepong Bhoocha-oom, the finance permanent secretary.

As commercial banks tighten their lending approval processes, mortgage insurance helps low-income earners and those without salary payslips get mortgage loans while reducing risk to lenders.

Mortgage insurance protects the lender, in part or in whole, from borrower non-payment or defaults on residential property loans. With the insurance, banks have an additional tool for managing home loan exposure.

After the central bank late last year warned of soaring household debt, especially for those with monthly income below 15,000 baht, banks have kept their guard up by tightening loan approvals.

Mr Areepong said mortgage insurance suits the Thai property market's structure.

The country's property sector has seen strong growth, outstanding mortgage loans are sufficient to diversify risk and the ratio of collateral value to housing loans is high, he said.

Mortgage insurance is not a new idea in Thailand. The Asian Development Bank has long suggested that mortgage insurance could benefit the country.

The Yingluck Shinawatra government has encouraged low-income earners to own their own home by offering tax refunds and zero interest for three years to first-time homebuyers.

About the author

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Writer: Wichit Chantanusornsiri
Position: Business Reporter