SCB to avoid zero-interest mortgages to reduce risk
Siam Commercial Bank says it has set a strategy for its mortgage business this year to help prevent speculation that could cause property bubbles.
The biggest mortgage lender among the country's commercial banks believes that speculation can result from banks' campaigns such as first-year zero-interest packages or free housing registration, said Pikun Srimahunt, head of SCB's mortgage business division.
The bank this year will not use such tactics.
"As a market leader, we should not help increase the [risk of] bubbles in the mortgage market [with such campaigns] even though we are not seeing any sign yet" of bubbles occurring, she said.
The bank found that about 10 per cent of its housing-loan customers had transferred their contracts to other buyers after one year, taking advantage of zero-interest campaigns. However, there was little worry over this level of speculation because the end buyers |represented real demand.
She said the bank's loan-rejection rate increased by 5 per cent in the fourth quarter last year, especially for applicants earning less than Bt15,000 a month.
If such people already have a debt burden from personal, |credit-card or auto loans, and they want to buy a home costing Bt1 million, they have a high chance of being rejected.
SCB last year attempted to penetrate the condominium market after the proportion of its loans for condo purchases decreased to 15 per cent from 20 per cent in 2011. The rate of non-performing loans from condominium purchases is 0.5-0.7 per cent lower than from other mortgages.
She said SCB might offer a zero-interest programme if a developer partner requests it, but the no-interest period would not exceed three months.
The bank this year targets new housing loans of Bt100 billion, and total outstanding loans of Bt450 billion. Last year, it booked new loans of Bt125 billion and had outstanding loans of Bt400 billion.