On 4 October, the Bank of Thailand (BOT, Baa1) announced measures to tighten credit underwriting standards in mortgage loans.
Under the new rules, the maximum loan-to-value (LTV) ratio will be restricted at 80% on new mortgages for homes worth more than 10 million baht.
The same LTV restrictions will apply for the purchase of a second home irrespective of the property value. Banks will also be prohibited from providing advances that exceed the value of a property.
New measures to target speculative buying
The new mortgage-lending rules are credit positive because they will help to reduce speculative buying and require banks to focus on borrowers with better credit quality.
We expect the measures to improve the asset qualilty of banks’ newly originated mortgage loans. Amid Thailand’s prolonged low interest rate environment, property prices have been rising steadily.
A 78% increase in condominium prices
According to the Bank for International Settlements, residential property prices in the Bangkok area have increased 49% in the past 10 years; nevertheless, the increase in condominium prices has been sharper at about 78% during the same period.
In addition, banks’ credit underwriting standards for mortgage loans have deteriorated because a greater proportion of newly originated mortgage loans have higher LTV and lower debt servicing capacity.
The housing NPL ratio rose to 3.4%
The share of high-LTV mortgages, or mortgages with LTV ratios of more than 90%, increased to about 49% of newly originated loans at the end of first-half 2018, from about 34% at the end of 2013, while the median loan-to-income (LTI) ratio rose to around 3.8x at the end of the first-quarter 2018, up from 2.7x during the same period (Exhibit 1).
For Thai banks, housing loans are the only type of consumer loans where the nonperforming loan (NPL) ratio has been increasing: for other retail segments, NPLs have remained stable or improved. The housing NPL ratio rose steadily to 3.4% as of June 2018 from 2.4% three years ago (Exhibit 2).
In addition, household leverage remained high in Thailand at 77% of GDP at the end of June 2018, although the growth rate has slowed.
Mortgages are a big business for Thai banks, accounting for 17% of systemwide loans and about 50% of total retail loans at the end of first-quarter 2018.
As such, the deterioration in the mortgage underwriting quality can have significant effect for banks if the property prices decline substantially.
The macro-prudential guidelines from the BOT follow similar guidelines issued by other countries in the region in the past few years (Exhibit 3).
Source : Moody’s Investors Service comment: Banking – Thailand: Bank of Thailand’s new rules to tighten mortgage lending are credit positive.
The Importance of E-Wallets for Online Gaming Sites
With e-wallets and cryptocurrency being the most relevant options, banks have been put on the side burner, especially when e-wallets and cryptocurrency allow for fast electronic transfer, that is done instantly.
Thai Government to issue Bt50 bln ( $1.57 bln)Savings Bonds to fund COVID-19 Relief Measures
The special savings bonds are available via the “Sasom Bond Mung Kung” e-wallet, abbreviated to “Sor Bor Mor” in Thai on Krungthai Bank’s Pao Tang mobile app, and through four dealer banks. The minimum purchase of these bonds is 1,000 baht, without no maximum. Interest is paid twice a year.
BANGKOK (NNT) – Thailand’s Public Debt Management Office (PDMO) plans to issue “Ying Aom Ying Dai” (the more you save, the more you earn) government savings bonds, worth 50 billion baht, next month, aiming to use the funds to finance state projects to ease the impacts of the pandemic.(more…)
Subscribe via Email
Thai baht becoming the region’s worst-hit currency in COVID pandemic
According to data from its tourism ministry as well as the World Bank, Thailand had only a little over 34,000...
Asia’s slow rate of vaccination is a thorn in the region’s economic recovery
Southeast Asia has been hit badly. Daily infections for Indonesia, Thailand, Vietnam are at their worst, on a seven-day moving...
TAT expects 850 billion baht ($25.7 bln) in tourism revenue after successful reopening
The Tourism Authority of Thailand (TAT) has set this year’s revenue target at 850 billion baht, 300 billion of which...
Download 1xBet mobile and play all over the world
Placing profitable bets or playing in a casino is now possible comfortably even without being tied to a computer. It...
3 ways Asia can recover from the COVID-19 pandemic faster
Countries in the East Asia and Pacific region will benefit from cooperation in three major areas: vaccine deployment, reviving sectors...