Banks want to see full-year housing-loan growth running at between 10 per cent to 12 per cent on last year, the centre said.

That would mean total housing loans for the year of between Bt1.33 trillion to Bt1.35 trillion. Total mortgage lending in 2005 was Bt1.21 trillion.

The research note showed housing-loan growth in the third quarter of 2006 slowed from the previous three-month period - bringing year-to-date mortgage lending to Bt1.31 trillion.

Total mortgage lending in the third quarter by all commercial banks was Bt675.7 billion for a year-on-year rise of 12.3 per cent, down from 14.2 per cent in the second quarter and off the 14.7 rise of the previous year.

Cumulative total mortgages for the year-to-date of Bt 1.31 trillion represent an increase of 11.51 per cent year-on-year but a slowing from last quarter's 13.8 per cent and the 15.7 per cent recorded over all of 2005.

KRC said the housing market had "posted decelerating growth since last year" and blamed this on a sluggish domestic economy. Purchasing power had been affected by several negative factors. Home buyers had adopted a more cautious stance in their home-purchase plans. Most opted to defer purchases until there was economic recovery.

This "dealt a blow to the mortgage-financing industry", the research note added.

As a way out, commercial banks and other financial institutions have introduced attractive interest rates to revitalise the market.

As a result of these moves, competition in the home-loan market became more concentrated during the second half of this year and is expected to intensify further in the final quarter.

Promotion campaigns and marketing activities will be used to expand mortgage bases.

These may include new products with many special interest-rate offers "to cater to customer demand and debt-servicing ability".

In addition "fee reductions, give-aways and sweepstakes" will be seen in the closing three months of the year.

The note said while interest rates were influential in winning home-loan customers, factors such as service, capability and speed of application processing were becoming more important.

Because price competition affects profits for commercial banks they will seek other ways of satisfying customers.

In spite of these efforts KRC is convinced the housing-loan business will decelerate over the remainder of the year.

Anxiety about income security and a slow economy will cause hesitant decision-making by home-buyers, it said.

But if the economy starts to look up next year and negative factors diminish, home-buyers will become more confident about jobs and cash flow.

KRC warned home-buyers to watch fluctuating interest rates carefully. It predicted they might fall in 2007.

KRC said it was possible some home buyers would put off purchases until there were clear signals about the direction of rates.

Commercial banks and financial institutions will introduce products employing "different interest-rate formulas".

KRC said location was a significant factor determining purchase decisions and "housing projects near mass-transit facilities will be popular".

It noted the government promised spending for five additional mass-transit routes but added consumers should wait for clarification.

The new rail routes are expected to be confirmed in March and construction to start in October.