Banks tighten housing loans

Banks tighten housing loans

Banks make it more difficult to get loans to prevent speculation, with rising household debt & economic slowdown.


Banks tighten housing loans

Lending ratios and mortgage numbers cut


Lenders have tightened their mortgage criteria by cutting loan-to-value (LTV) ratios to prevent speculation in the wake of high household debt and an economic slowdown.

To limit risks, United Overseas Bank (Thai) (UOBT) has lowered the LTV rate - the ratio of a loan to the value of an asset purchased - to 80% from 90% for housing units priced 10 million baht or more.

Kasikornbank (KBank) has also slashed the rates to a range of 75% to 80% from 90% to 95% for third-home borrowing, while TMB Bank (TMB) has cut its LTV rates to 70% from 90-95% for second mortgages and vacation homes.

The voluntary moves indicate banks have started applying more stringent requirements to not only lower-income earners but also higher-income groups after the central bank repeatedly warned of the risks stemming from rising household debt and signs of a property bubble.

The Bank of Thailand first announced compulsory minimum LTV ratios on mortgages in 2011 to cool down growth in the property sector amid oversupply worries.

It set the minimum LTV ratios at 90% for condominiums priced up to 10 million baht a unit and 95% for low-rise residences - single houses, duplexes and townhouses.

This means buyers have to make 10% and 5% down payments respectively before they can take out loans.

UOBT's LTV reduction was aimed at avoiding property speculation amid liquidity concerns for high-value assets, said Yuttachai Teyarachakul, executive vice-president for personal financial services.

He said UOBT approves loans up to 95% of the value for first-time mortgages, 90% for second ones, and 70% for third ones. As a rule, it limits loans to third mortgages for each borrower.

UOBT's mortgage portfolio is 70 billion baht at present and those who earn 40,000-50,000 baht a month make up a lion's share.

With incomes at such levels, they are qualified to buy residences priced around 3-5 million baht each.

Mr Yuttachai added UOBT has joined its conservative peers in scrapping zero-percent mortgages, a marketing tool banks use to attract borrowers.

The move is in response to the Bank of Thailand's new rule which requires commercial banks to disclose the effective interest rate and total burden of interest, fines and other charges that may be incurred throughout the term of a mortgage product. Starting Aug 1 this year, the information must be included in their advertisements and potential customers must be informed of it before signing loan contracts.

As well, KBank on June 17 this year reduced its LTV rates to 75-80% from 90-95% for third-home mortgages, its limit for each borrower.

TMB has also cut the LTV ratio for second mortgages and vacation homes to 70% from the normal levels at 90-95% for the same reason, said executive vice-president Kanchana Rojvatunyu.

Besides, the bank has focused on extending mortgages to homes priced 1-2 million baht a unit.

Unlike others, Bank of Ayudhya has not changed its LTV ratio but has limited lending to three mortgages for each borrower.

Several negative economic indicators, especially tepid domestic consumption and rising household debt, have prompted the bank to be more prudent with consumer loans, said Thakorn Piyapan, managing director of Krungsri Consumer, an unsecured loan unit of Bank of Ayudhya.

Its main concern now is customers who earn less than 10,000 baht per month as daily expenses have increased on the back of higher living costs and goods prices while household debt burden has skyrocketed.

Krungsri First Choice, a personal-loan brand under Krungsri Consumer, allows earners of less than 10,000 baht a month to apply for loans.

"We mainly take into account their ability to repay debts on a case-by-case basis," he said.

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  • aim: to have as your purpose or goal - มีเป้าหมาย มีจุดมุ่งหมาย
  • amid: happening while something else is happening - ท่ามกลาง
  • apply (verb): to make a formal request for permission to do or have something - ขอ, สมัคร
  • apply: to make use of something - นำมาใช้
  • approve: to give official permission - อนุมัต
  • asset: something owned by a person, company etc., particularly money and property - ทรัพย์สิน
  • avoid: to stay away from; to not use - หลีกเลี่ยง
  • brand: a type of product made by a particular company - ตรา, ยี่ห้อ
  • bubble (noun): bubble - economic bubble; an economic situation in which prices of stocks or real estate rise very quickly and many people make a lot of money and then lose money when the "bubble bursts" - เศรษฐกิจฟองสบู่
  • case-by-case basis: considering cases one by one - โดยพิจารณาเป็นกรณีไป
  • central bank (noun): the main government bank in a country that controls the supply of loans (credit) and the supply of money in the country and provides financial services to the government and other banks - ธนาคารแห่งชาติ
  • compulsory: if something is compulsory, you must do it because of a rule or law - ที่จำเป็นต้องทำ
  • concern: a worry - ความกังวล
  • criteria: a standard that is used for judging something or for making a decision about something - บรรทัดฐาน
  • debt (noun): an amount of money that you owe - หนี้, นี้สิน
  • down payment: a first payment that you make when you are buying something and are going to pay the rest later - เงินที่ชำระราคาครั้งแรก
  • earner: a person who earns money for a job that they do - ผู้มีรายได้
  • expenses: money spent in doing a particular job, or for a particular purpose - ค่าใช้จ่าย
  • financial: involving money - เกี่ยวกับเงิน, ทางการเงิน
  • household: a group of people, often a family, who live together - ครัวเรือน
  • in the wake of: happening after an event or as a result of it - สืบเนื่องมาจาก
  • indicate: to show that something is true, exists or will happen - แสดง, ทำให้รู้
  • liquidity (noun): the ease with which assets can be turned into cash - สภาพคล่อง
  • loan: an amount of money that a person, business, or country borrows, especially from a bank - เงินกู้
  • loan to value ratio (noun): a measure of loan risk used by banks, "the loan-to-value (LTV) ratio is a financial term used by lenders to express the ratio of a loan to the value of an asset purchased... For instance, if a someone borrows $130,000 to purchase a house worth $150,000, the LTV ratio is $130,000 to $150,000 or $130,000/$150,000, or 87%. Loan to value is one of the key risk factors that lenders assess when qualifying borrowers for a mortgage. ... as the LTV ratio of a loan increases, the qualification guidelines for certain mortgage programs become much more strict" (Source: Wikipedia) -
  • minimum: the lowest possible; the lowest allowed - ต่ำที่สุด, น้อยที่สุด
  • mortgage: a legal agreement in which you borrow money from a bank in order to buy a house, build something, develop a piece of land, etc - การจำนอง
  • personal: your own; not belonging to or connected with anyone else - เป็นส่วนตัว
  • personal loan (noun): a loan for an individual person or people, not a company -
  • portfolio (noun): a set of investments owned by a company, person or organization - หลักทรัพย์การลงทุน, หลักทรัพย์ในครอบครอง, กลุ่มหลักทรัพย์; หลักทรัพย์ทั้งหมด ในความครอบครองของ ผู้ลงทุนรายใดรายหนึ่ง
  • property: land owned by someone - ที่ดิน, อสังหาริมทรัพย์
  • prudent: careful and using good judgment - รอบคอบ ถี่ถ้วน
  • purchase: the process of buying something - การซื้อ
  • ratio (noun): the relationship between two numbers or amounts, one number over another number, proportion, fraction - อัตราส่วน, สัดส่วน, อัตราเปรียบเทียบ
  • reduction: the process or result of making something smaller or less in amount, size, importance etc - การลดลง
  • repeatedly: happening, said or done many times - อย่างซ้ำๆ
  • requirement: something that you must have or do in order to do or get something else - ข้อกำหนด, ข้อบังคับ
  • residence: a place where someone lives - ที่พำนัก ที่อาศัย
  • respectively: in the order in which they were mentioned - ตามลำดับ
  • risk: the possibility that something dangerous or unpleasant might happen - ความเสี่ยง
  • sector: a part of a country’s economy or business activity - ภาคเศรษฐกิจของประเทศ
  • secured loan (noun): a loan with security, a loan with security money (เงินวางประกัน) -
  • skyrocket: to increase very quickly - ลอยขึ้นสูงอย่างฉับพลัน
  • slash: (of a budget, price, etc.) to cut, especially by a large amount - ตัด
  • speculation (noun): buying something so that when the price of the thing goes up you will make money - กักตุน, การเก็งกำ, การเก็งกำไรสินค้าของพ่อค้าทำให้เขาถูกต่อว่ามากมาย, การหมุนเงิน
  • stem from (verb): to be caused by, to come from - เกิดจาก
  • stringent: (of a rule, law, etc.) very strict and that must be obeyed - เข้มงวด
  • supply: an amount or quantity of something that is available to use -
  • take into account: to consider; to think carefully about the various factors involved before making a decision or developing an opinion - พิจารณา, คิดอย่างละเอียด
  • unsecured loan (noun): a loan without security, i.e., a loan that is not backed by something valuable, like property or other assets - เงินไม่วางประกัน
  • vacation: holiday; a period of time spent travelling or resting away from home - ลาพักผ่อน, ลาพักร้อน
  • voluntary: done because you choose to do it rather than because you have to - ด้วยความสมัครใจ
  • warn: to make someone aware of a possible problem or danger - เตือน
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