BoT vows to maintain LTV regulations

BoT vows to maintain LTV regulations

A woman passes model houses at last year's House and Condo Expo. The central bank says recent housing loan applications represent real demand.
A woman passes model houses at last year's House and Condo Expo. The central bank says recent housing loan applications represent real demand.

The central bank has been closely monitoring property supply amid the slower pace of residential project sales, vowing to keep loan-to-value regulations for mortgage loans unchanged.

Based on an examination of the remaining inventory of the property sector, there is no oversupply in the market, said Ronadol Numnonda, deputy governor for financial institutions stability.

Against a backdrop of slowing sales due to the coronavirus outbreak, the central bank will not ease LTV regulations to spur the property market or mortgage loans, Mr Ronadol said.

The central bank introduced LTV rules in April 2019 in order to prevent counterfeit demand for mortgage loans.

The move also aimed to standardise the overall housing loan business and initiate real demand from homebuyers, especially those seeking a first home.

According to the revised LTV regulations, homebuyers are required to make a minimum down payment for third and subsequent mortgages of 30% of the home price, with second mortgages set at 10-20%, depending on how long a borrower has made payments on the first one.

The LTV ratio of 90-100% remains unchanged for those planning to buy a home priced below 10 million baht. But the ratio drops to 80% when the borrower buys a residence valued at 10 million baht or higher.

The central bank, however, relaxed some LTV conditions in January of this year by shortening the minimum debt-servicing period for first mortgages for those seeking second homes priced below 10 million baht.

Another tweak is lowering the minimum down payment for first mortgages for homes valued at 10 million baht or more.

Those who buy residences valued at less than 10 million baht and apply for a first mortgage are also allowed to take out a top-up mortgage of up to 10% on top of the housing loan, constituting as much as 110% for the mortgage bundled with the top-up.

"Both the LTV regulations and the virus outbreak have reduced fake demand [for mortgage loans] significantly," Mr Ronadol said. "Existing housing loan applications are now mainly real demand."

The central bank will keep the existing LTV regulations unchanged.

Meanwhile, banks and property developers have also adjusted business operations to be in line with the LTV regulations and the coronavirus crisis.

Sammit Sakulwira, first executive vice-president and head of the commercial lending group at Kiatnakin Phatra Bank, said the bank has adjusted its business strategy for pre-finance projects amid the pandemic.

KKP focuses on low-rise residential projects in light of higher risk in the condo segment, which has witnessed oversupply in some locations, Mr Sammit said.

With this scenario, new lending for low-rise projects represents 90% of total new loan approvals for pre-finance projects.

Meanwhile, low-rise projects make up 60-70% of the bank's total property loan portfolio.

The bank has also relaxed the debt-to-equity (D/E) ratio for property developers investing in new residential projects amid the downturn, Mr Sammit said.

The D/E ratio for new residential project investment has been increased to 2.5 times at the maximum, up from the previous 2 times, on a case-by-case basis.

KKP, a small bank, has revised up its projection for this year's property loan growth to 7% from the 4% forecast previously.

The higher growth projection is partly due to a loan suspension measure under the central bank's debt relief programme.

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