Cheaper home loans but shorter fixed periods

Here is a review of banks' mortgage packages for early next year, incorporating rate reductions but shorter fixed periods.

Chatchai Payuhanaveechai, senior vice president of Kasikornbank, said that on January 1 the bank would lower its fixed mortgage rate by 0.25 to 0.5 of a percentage point.

Kasikornbank's current mortgage rate is fixed at 1 per cent for the first three months. There are six choices following the initial period: a fixed rate of 4 per cent or the minimum lending rate (MLR) minus 2.75 percentage points in the fourth to 12th months; a fixed rate of 5.75 per cent or MLR minus 0.75 of a percentage point in the fourth to 24th months; and a fixed 6.25 per cent or MLR minus 0.5 of a percentage point in the fourth to 36th months. After that, MLR - currently 6.75 per cent - is applied to the loan.

A source from Bangkok Bank said that on January 1, the bank plans to decrease the mortgage rate by 0.25 of a percentage point. However, this has yet to be approved by the bank.

Current Bangkok Bank mortgages offer three choices: a fixed rate of 3.25 per cent in the first year; a fixed 5.25 per cent in the first two years; and MLR minus 1 percentage point in the first three years. MLR, which is 6.75 per cent, is then applied to all choices.

Arpichad Akdhakura, senior vice president for the Housing Loan Department of Siam City Bank, said the bank was maintaining the current mortgage rate in the first quarter at a fixed 1.99 per cent for the first year and MLR minus 1.25 percentage points from the second year onwards.

The other choice is a floating mortgage at MLR minus 4 percentage points in the first year, MLR minus 3 percentage points in the second year, and MLR minus 1.25 percentage points thereafter. The bank's MLR stands at 7 per cent.

Siam City Bank is also focusing on mortgage refinancing, as the current economic situation may force borrowers to refinance their debt.

Arpichad said homeloan rates would fall next year in line with the overall trend. Besides, fixed mortgage rates might be offered for a shorter period.

The majority of the bank's homeloan customers chose to use its floatingrate packages, he said, adding that it would continue to develop mortgages in order to attract borrowers. However, these will not be in the form of bundled products, which force customers to buy an allinone package.

Rungruang Sukkirdkigpiboon, executive vice president and head of the Retail Lending Products Division of Siam Commercial Bank, said that next year's promotions by commercial banks would not be different from those in the current quarter in terms of interest rates, while banks would wait to assess the situation in the first half.

Therefore, they will not be much additional competition in terms of promotions and rates.

Siam Comercial Bank offers four types of mortgage: a fixed rate of 4.25 per cent in the first year and then the minimum retail rate (MRR) plus 0.25 of a percentage point; a fixed rate of zero interest in the first six months and MRR minus 0.25 of a percentage point in the next six months, then MRR plus 0.25 of a percentage point; and for customers preferring a floating mortgage rate, a choice between MRR minus 3.75 percentage points in the first year and MRR minus 1.75 percentage points in the first two years. Customers of both floatingrate types are charged MRR of 7.25 per cent plus 0.25 of a percentage point therefafter.

Paiboon Larprojejarugoon, first vice president for the Mortgage Business Department of TMB Bank, said that next year the bank would offer mortgages at a fixed rate of 1.5 to 2 per cent in the first six months, after which a floating rate will be applied.

TMB also offers a special homeloan rate for refinancing at a fixed 1.25 per cent in the first six months, as many borrowers are likely to seek a reduction in their interest burden.