Financing mortgages now restricted as liquidity drops

Commercial banks and financial institutions have restricted mortgages for homebuyers since early this year after United States was hit by the subprime cri¬sis, a survey by The Nation conducted last week has revealed.

"Banks now have to recheck cus¬tomer credit history with the Credit Bureau and also evaluate whether the applicant has the ability to pay back before approving the loan. As a result, we reject up to 40 per cent of new appli¬cations for mortgages," he said.

However despite the rise in rejec¬tions, Chatchai believes Thailand's banking system will not face a homeloan crisis in the US.

However, he is concerned about liquidity in the banking system, which now has a loanperdeposit ratio of up to 90 per cent and liquidity in the market is between Bt400 billion and Bt500 billion, which may be not enough to fulfil the demand for mort¬gages next year.

GH Bank's nonperforming loans (NPLs) rose substantially from 5.8 per cent from the end of last year to 11.8 per cent by the end of June, Khan said.

Khan said many factors - such as the economic slowdown, rising inter¬est rates, high oil prices and a new method of calculating NPLs - had been responsible for the sharp rise in NPLs. The daypastdue method forces loans to be counted as NPLs more easily than the previous instal¬mentdefault method, he said.

This will better the customer's financial profile before they apply for mortgages from the bank.