Chatchai Payuhanaveechai, senior vice president for consumer loans at Kasikornbank, said banks might possibly provide longer fixed-rate mortgage loans around the second quarter of next year, with maximum loan periods shifting from one year to three years.

He said this assumption was based on domestic interest rates, which are expected to reach a peak this year, then stabilise and begin to reduce by the middle of the year.

"Locked in by funding costs, commercial banks are unable to give a fixed-rate charge [for loans] up to 15 years like the Finance Ministry has proposed, unless the government subsidises it," said Chatchai.

He said that when interest rates decreased, banks' mortgage-loan borrowers would likely refinance their loans by moving to deals with lower rates. This is expected to occur in the second half of next year.

Meechai Kongsangchai, retail credit manager at Siam Commercial Bank (SCB), agreed that competition in longer-term fixed-rate housing loans would heat up by the middle of next year, in line with trends in interest rates.

"However, the period [being offered] for fixed-rate loans should be based on customers' demands. It shouldn't be too long. The maximum term will be around three years," he said.

He said SCB recently offered housing loans with a maximum period of 15 years, but the product proved unsuccessful, because the loan maturity did not match customers' demands and was seen as inflexible.

Meechai said housing-loan refinancing schemes would possibly occur in the middle of next year, when interest rates were expected to be reduced. However, if the gap in interest rates being offered by different banks is not greater than one percentage point, customers are unlikely to move from one bank to another.

The Kasikorn Research Centre has forecast mortgage-loan growth of around 8-10 per cent this year in Thailand's commercial banking system, down from last year's 15.7 per cent.

Somruedi Banchongduang

The Nation