In the midst of the slower speed of residential project sales, the Bank of Thailand has closely controlled property supply, vowing to hold unchanged loan-to – value (LTV) regulations for mortgage loans.
Based on a review of the property sector’s remaining inventory, there is no oversupply in the industry, reported Ronadol Numnonda, Deputy Governor for Stability of Financial Institutions. Because of the coronavirus outbreak, the central bank would not ease LTV regulations to stimulate the property market or mortgage loans.
In April 2019 the central bank adopted LTV rules to avoid falsified demand for mortgage loans. The change also aimed at standardizing the entire housing loan business and initiating real demand from homebuyers, especially those looking for a first home
Homebuyers are obliged to make a minimum down payment of 30 percent of the home price for third and subsequent mortgages, with second mortgages set at 10-20 percent, depending on how long a borrower has made payments on the first. For those looking to buy a home priced below 10 million baht, the LTV ratio of 90-100 per cent remains unchanged
However, in January of this year, the central bank eased some LTV conditions by shortening the minimum debt-servicing period for first mortgages for those seeking second homes priced below 10 million baht. Another tweak is a drop in the minimum down payment for first mortgages for homes priced at or above 10 million baht.
Those who purchase residences priced at less than 10 million baht and apply for a first mortgage can also take out an additional mortgage of up to 10 percent on top of the housing loan, which represents as much as 110 percent of the mortgage bundled with the additional loan. Both the LTV regulations and the virus outbreak have greatly decreased counterfeit demand [for mortgage loans], “Mr Ronadol said.” Current applications for housing loans are now mainly real demand. The central bank will remain unchanged to existing LTV regulations.
KKP focuses on low-rise residential projects in the light of higher risk in the condo market, which has witnessed excess supply at some locations, Mr Sammit said. In this example , new loans for low-rise developments constitute 90 per cent of total new pre-financing loan approvals. The higher growth projection is partly due to a loan suspension measure under the central bank’s debt relief programme.