Mortgage interest rates expected to rise soon

Economy August 24, 2012 00:00

By Sucheera Pinijparakarn


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Banks plan to raise interest rates for new home loans by at least 0.35 percentage point next quarter to cover the higher cost of funds resulting from furious deposit mobilisation.

"Housing loans today suffer narrow margins. If banks continue to freeze their interest rates, lenders will face losses," Pikun Srimahun, executive vice president of Siam Commercial Bank, the largest mortgage lender among commercial banks, said yesterday.

People shopping for new homes should make a quick decision at the Home Loan fair running until Sunday because it should be the last event for consumers to avail of promotions including zero interest rates.

Pikun said SCB planned to raise its mortgage rates by 0.35-0.50 percentage point and believed that several other banks would also have to increase theirs.

The average rate in the home-loan market is 3 per cent, she said.

The new rate for new home loans at SCB is expected to be revealed in October.

Customers can afford the higher rate because on a home worth Bt1 million they will pay only Bt350 more per instalment, she added.

Vissarut Panyapinyopon, vice president for real-estate lending at Kiatnakin Bank, said the industry needed to charge borrowers more because of the need to pay higher interest rates and costs to attract deposits.

"The higher cost of funds is a key reason Kiatnakin can’t offer housing loans to retail customers, because we are a small bank, which has a higher cost of funds than major banks," he said.

Kiatnakin offers only project financing to developers.

Chatchai Payuhanaveechai, secretary-general of the Housing Finance Association and an executive vice president of Kasikornbank, said customers who are looking for attractive campaigns should visit the Home Loan fair, because several banks including KBank are offering mortgages charging zero interest for part of their terms to drive the market.

KBank’s K-Home loans feature an extended repayment term of 50 years plus a special zero interest rate for the first six months.

SCB is also trumpeting a zero rate for the first six months at the event, while Thanachart Bank’s 10 months with no interest is the longest period at the fair.

TMB Bank is marketing a zero rate for the first two months for new home loans and refinancing, while Bank of Ayudhya’s zero rate is for the first three months.

The association expects that the four-day event will generate new loans of Bt14.6 billion, up 10 per cent from Bt13 billion at the event last year.