The Bank of Thailand is relaxing loan-to-value (LTV) rules to support the slumping property market, saying the change will not significantly increase risks to financial stability.
Under the new rules effective from May 1, 2025 to June 30, 2026, loans of up to 100% of the collateral value will be allowed for first homes worth more than 10 million baht, and also for second homes worth less than 10 million baht, the central bank said in a statement on Thursday.
“The real estate sector is slowing down continuously with no clear signs of recovery,” it acknowledged.
The announcement comes at a time when high household debt and cautious lending by banks has led to a weakening of domestic demand for new homes. At the same time, international buyers have yet to return to the Thai market in full force.
Developers have argued that the existing LTV regulations, intended to curb speculative activity and ensure that households do not become overburdened, could be loosened without affecting the country’s financial stability.
Under current regulations, first-time homebuyers can secure loans of up to 100% for properties valued at less than 10 million baht, and 90% for properties priced at 10 million baht or more.
Second-home buyers can borrow up to 90% for properties worth less than 10 million baht if they have made payments on their first mortgage for at least two years. The rate dips to 80% if the first mortgage has been paid for less than two years.
For buyers of third homes or more, the LTV ratio is capped at 70% regardless of the property price.
The measures were introduced in April 2019, and temporarily relaxed between October 2021 and December 2022 during the post-pandemic economy. However, the central bank reinstated the original measured at the start of 2023, saying there were emerging risks to financial stability from property speculation.
Somchai Lertlarpwasin, assistant governor for financial institutions policy group, at the BoT, said on Thursday that relaxing LTV criteria now would not significantly increase risk because current financial conditions are tight in any case, and lenders are cautious about granting credit.
In 2024, home loans dropped by 13.4% year-on-year to 587 billion baht, while the value of nationwide residential property transfers declined by 6.3%, according to the Government Housing Bank.
As of September 2024, Thailand’s household debt was 16.34 trillion baht, or 89% of GDP, one of the highest levels in Asia and a drag on consumption and growth. The central bank on Wednesday said solutions for tackling household debt must ensure good financial discipline.
Finance Minister Pichai Chunhavajira earlier on Thursday said the government was planning to announce a reduction in transfer and mortgage registration fees within a month to further support the sector.
“This engine is large and hasn’t been fully operational for over 10 years,” he told reporters.
A cut on ownership transfer fees and mortgage registration fees to 0.01% for houses valued up to 7 million baht ended last year.
Mr Pichai said he was also exploring ways to manage borrowers’ bad debt of less than 100,000 baht, primarily consumer debt, which he said would require a minimal budget, just management costs, and would not burden the government.
Longer period required
Prasert Taedullayasatit, president of the Thai Condominium Association, said the eased lending curbs could help revive demand, particularly in the mid to upper-end segment, where some buyers purchase units as second or third homes.
“The easing of LTV limits can facilitate these transactions,” said Mr Prasert.
“However, they should be eased for at least two years, or until the economy and the residential market recover.”
Some developers and property analysts expect the eased lending curbs to have a minimal effect, with cuts to transfer and mortgage fees as well as a drop in interest rates to help more because the core issue is borrowing capacity.
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