President Khan Prachuabmoh also told reporters yesterday that the state-owned bank would introduce floating-rate mortgage loans worth more than Bt1 million to replace the three-year fixed rate.

The new rate and floating mortgage loans take effect today.

The new floating rates will be the minimum retail rate (MRR) minus 1.5 per cent, 1.25 per cent and 1 per cent in the first, second and third years, respectively. The rate will be based on the MRR - which now stands at 7.75 per cent - throughout the remaining period.

Khan said the bank charged MLR mostly on loans to small real-estate developers, while the MRR and MLR rates would change in line with market conditions.

"Fierce competition for deposits among banks has driven the cost of funds, so GHB had to raise lending rates to compensate for the rising costs," said Khan.

GHB, however, confirmed that its three-year fixed rate for mortgage loans worth Bt1 million or less would remain available, but the rate would change from step-up rates to a flat rate of 6.25 per cent per annum. Earlier, the bank collected the three-year fixed rate at 5 per cent for the first year, 6 per cent for the second and 7 per cent for the third.

"As interest rates are rising, the step-up rate model has put GHB at a disadvantage," said Khan. He explained that profits in the first quarter dropped 38 per cent to Bt880 million, partly due to its previous increase in deposit rates to compete for savings.

GHB was the last to raise its lending rates, because the bank wanted to provide loans for middle- and low-income groups, which are the bank's majority clients, he lamented.

About 70 per cent of borrowers have loans worth less than Bt1 million.

The bank will continue to offer the step-up rate pattern for its five- and 10-year fixed rates, but the rates would be raised. The new five-year fixed rates are 6.5 per cent for the first year, 6.75 per cent for the second, 7 per cent for the third, 7.25 per cent for the fourth and 7.5 per cent for the fifth.

The new 10-year fixed rates are 6.5 per cent, 6.75 per cent, 7 per cent, 7.25 per cent for the first to fourth years, respectively, then 7.5 per cent for the fifth to tenth years.

Growth in new lending showed signs of a slowdown, and the bank has set its lending target at Bt115 billion, compared with Bt125 billion in lending last year.

Khan said new lending this month was expected to be Bt7 billion, which would be less than the Bt9 billion recorded for last April. As of the end of last month, GHB's outstanding loans amounted to Bt489.7 billion, up 18.83 per cent, and new lending was worth Bt29.97 billion.

Wichit Chaitrong

The Nation