The Bank of Thailand will impose a more stringent required minimum down payment for third and subsequent mortgages of 30% of home price, but it will ease the minimum requirement for a second housing loan to 10-20%, depending on how long a borrower has made payments on the first one.
The effective date has been pushed back four months to next April 1 after lobbying by property developers and lenders.
The central bank will require those who purchase a home at a price below 10 million baht and seek a second home loan to make at least a 10% down payment in the event that they have made payments on the first mortgage for three years or longer, said Jaturong Jantarangs, assistant governor in charge of the supervision group.
The minimum down payment requirement will be raised to 20% if borrowers have serviced the first mortgage for less than three years.
For those who seek a second mortgage to fund the purchase of a home priced at 10 million baht or higher, a minimum 20% down payment is required.
Those who apply for third and subsequent mortgages will be subject to a minimum 30% down payment, regardless of home price.
The loan-to-value (LTV) ratio of 90-100% remains unchanged for those who apply for a first mortgage to buy a home priced below 10 million baht, but the ratio will be lowered to 80% in cases where a borrower buys a residence valued at 10 million baht or higher.
Typically, a loan with a lower LTV ratio carries less risk for both lender and borrower, as less capital is being borrowed.
"The revised-mortgage loan regulation will impact homebuyers who have multiple mortgages at the same time, and those who purchase residential units priced from 10 million baht," Mr Jaturong said.
The tighter rules are to comply with the central bank's macroprudential policy to minimise risk in the property and mortgage lending industries. Thailand's 1997 financial malaise originated in the real estate sector.
Mr Jaturong has said repeatedly that there is no sign of a property bubble right now.
The central bank last month proposed requiring borrowers to make a down payment of at least 20% of homes priced at 10 million baht or higher, as well as for second and subsequent mortgages, in an effort to curb mortgage and property risks and improve housing loan quality.
Under the previous proposal, lenders would also have been required to limit mortgages together with top-up mortgages such as personal loans and loans for mortgage-reducing term assurances (MRTA) at 80% of home value for second mortgages and homes priced at least 10 million baht, and at 100% for first homes valued below 10 million.
Mr Jaturong said loans for MRTA, small and medium-sized enterprises and fire insurance, under the new rules, will not be counted into a single amount with a mortgage, but other types of top-up mortgages must be bundled into the mortgage.
The new regulation will strengthen mortgage loans approved by financial institutions, while the unchanged down-payment requirement for the first mortgage to buy homes priced at less than 10 million baht will allow those who have real demand to access housing loans at a reasonable interest rate.
Mr Jaturong said the new requirement will not be applied to those with signed land sale contracts or those who made down payments before Oct 15 this year, to refinancing of sole mortgages, or to housing loans for building homes on owned land that is free of debt.