New product about to be launched

Visitors view a housing model at a recent home fair. Many home-buyers are seeking mortgages that fit their needs.

Home-buyers who don't see any existing home loan fitting their needs may consider the new product to be launched soon by the Secondary Mortgage Corporation and GH Bank.

The fixed interest rates to be introduced by both organisations will be offered for a longer period than the fixed rates currently available from commercial banks, and the GH Bank loan will be for 30 years.

GH Bank, which usually reserves the best mortgage rates for members of the Social Security Fund and Government Pension Fund, as well as low-income groups, will this time offer its new product to the general public.

The SMC and GH Bank will launch mortgage loans with rates fixed for one, two and five years, a source said last week.

The one-year rate will be 3.99 per cent, the two-year rate 4.99 per cent and the five-year rate 6.99 per cent.

The longest fixed-rate period now offered by a large bank is 33 months from Kasikornbank at 6.25 per cent.

The bank also offers a fixed rate of 5.75 per cent for 21 months and 4 per cent for nine months. After the three promotional fixed-rate packages end, customers will be charged the minimum lending rate of 7.25 per cent.

Bangkok Bank also offers fixed rates of 5.25 per cent for two years and 3.25 per cent for one year, followed by the MLR of 7.25 per cent.

Other commercial banks offer a one-year fixed rate before the loan becomes variable-rate.

With interest rates heading up since the Bank of Thailand lifted its policy rate by 25 basis points to 3.5 per cent, the SMC sees an opportunity to expand its role.

The credit line per borrower will range from Bt300,000 to Bt10 million, with maturities reaching 30 years. The SMC targets total loans at Bt1 billion.

Since the SMC is not a bank, it cannot directly lend to home-buyers, but it can buy GH Bank's mortgage portfolio.

The source said the Finance Ministry had agreed to inject Bt100 million into the state-owned SMC. With the government's support, its outlay on funds is relatively low, and it can market attractive loans.

The SMC is also negotiating with Kasikornbank to launch a home-loan package, the source said, though details have not been released.

The SMC also plans to issue long-term bonds worth Bt500 million-Bt1 billion, either mortgage-backed bonds or ordinary bonds, the source said.

If the SMC decides to securitise its loan assets, it would pool prime, not sub-prime, home loans to back the bonds.

The SMC is studying the market, as the lingering sub-prime mortgage-loan crisis in the United States has scared investors away from debt markets while the rising interest-rate trend scares them away from bond markets.