Siam City Bank (SCIB)'s rejection rate for mortgage loans increased to half of total applications in the first quarter of the year, said executive vice president Angkana Sawadpoon.

Aside from interest rate increases, she said, the lower purchasing power of homebuyers and the country's political uncertainty in the first quarter also affected the bank's home loan approvals.

Normally, the bank's rejection rate for mortgage loans is lower than 50 per cent, she said.

Kasikornbank's senior first president for the consumer loan department, Chatchai Payuhana-veechai, said his bank's housing loan approval rate also fell in the first quarter.

This was mainly caused by the recent interest rate hikes.

He said an interest rate rise of 1 per cent affects homebuyers' purchasing power by 6 per cent. Over the past year, the bank's minimum lending rate (MLR) rose from 5.5 per cent to 7.5 per cent, which affected purchasing power by 12 per cent.

"Before the rate sharply increased, homebuyers who wished to pay a monthly instalment of Bt7,000 were required to have a monthly income of Bt18,000. But now they are required to earn a minimum of Bt20,000 per month to qualify for this loan instalment rate," he

said.

Seasonal factors and political turmoil in the first quarter also affected borrowers, causing delays in decisions on mortgage loans. Currently, Kasikornbank's home loan approval rate is around 60 per cent of total applications, down from around 70 per cent earlier, Chatchai added.

The bank's home loan approval rate has declined since 2005, when the bank changed its credit-scoring method. In the first quarter of this year, Kasikornbank recorded new mortgage loans for the first quarter at Bt3.5 billion from a full-year target of Bt18 billion.

Charlotte Donavanik, senior executive vice president of Bank of Ayudhya, said the bank's rejection rate for mortgage loans was unchanged at 25 per cent to 28 per cent.

She said the bank focuses on homebuyers who are clients of the bank's business partners in housing projects.

Moreover, the bank's customer target group is middle-class earners who have the means to pay loan instalments despite higher rates. As a result, the bank can maintain a rejection rate lower than 30 per cent, she said.

In the first quarter of the year the bank provided new mortgage loans totalling Bt4.5 billion, and it is on target to achieve its full-year forecast of Bt20 billion, she said.

Somruedi Banchongduang

The Nation