New mortgage lending slips

New mortgage lending slips

Central bank reports 8% drop in first month after tougher loan-to-value rules took effect

The number of new mortgage borrowers sank 8% year-on-year in April after the launch of loan-to-value. (Bangkok Post file photo)
The number of new mortgage borrowers sank 8% year-on-year in April after the launch of loan-to-value. (Bangkok Post file photo)

The number of new mortgage borrowers sank 8% year-on-year in April after the launch of loan-to-value (LTV) curbs at the start of that month, says a senior official at the Bank of Thailand.

“The decline stemmed from mortgage borrowers with two contracts or more, particularly buyers of high-rise residences, while new housing loans for those who have only one mortgage contract grew at a pace close to last year’s,” said Ronadol Numnonda, deputy governor for financial institutions stability.

The result of the new LTV restrictions is in line with expectations, he said, and the central bank will further monitor the situation and listen to what the impacts from the curbs are.

Since April 1, homebuyers have been required to make a minimum down payment for third and subsequent mortgages of 30% of the home price, with those for second mortgages set at 10-20%, depending on how long a borrower has made payments on the first one. The rules are intended to curb risky borrowing as well as property speculation.

The 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 is lowered to 80% when the borrower buys a residence valued at 10 million baht or higher.

State-owned banks have said their mortgage lending declined considerably in April, prompting the Finance Ministry to ask the Bank of Thailand to relax the measure.

Mr Ronadol said that while it is too early to assess the LTV measures, new mortgage borrowing still jumped 25% year-on-year during the first four months as property developers encouraged buyers to speed up purchase decisions before the changes took effect.


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