Global: Bank of Thailand will stop allowing 100% mortgages

The Bank of Thailand will not extend the easing of loan-to-value (LTV) measures for mortgage loans as the economy is showing clearer signs of recovery.

The central bank decided against further extending the easing of LTV measures launched in October 2021 and set to expire in December 2022, said the Bank of Thailand’s assistant governor Chayawadee Chai-Anant.

The easing was aimed to help homebuyers and boost the property sector amid the Covid-19 crisis. It allows banks to approve housing loans for borrowers of up to 100% of total home value for all types of mortgage loan contracts.

Under normal LTV regulations, the central bank requires banks to approve mortgage loans for homebuyers of up to 80-90% for houses priced above 10 million baht per unit. The central bank allows banks to approve a loan of up to 100% for houses priced below 10 million baht.

Ms Chayawadee said the central bank declined to renew the easing because of clearer improving signs of the economy and property sector as well as related industries.

The end of the easing would not impact lower income homebuyers, who mostly purchase a first house priced lower than 10 million baht, she said.

However, those who want to buy houses priced over 10 million baht would be impacted as they need to make a down payment in the range of 10-20%.

The easing, if extended, could lead to possible risks in the financial system in the future, such as real estate price speculation by middle income and high income earners.

Meanwhile, Krisada Chinavicharana, permanent secretary of the Finance Ministry, said the ministry might consider extending the reduction in the property transfer and mortage fee from the expiration at the end of this year, aiming to continue to support the sector.

The government launched this measure to boost housing demand effective from January this year.

The measure cut the property transfer fee to 0.01% from 2% of the appraisal price and the mortgage fee to 0.01% from 1% of the loan value. This covers residential units with an appraisal value of 3 million or less.

In a separate development, Thailand’s recovery remained on track in September, according to data released by the central bank.