GOVERNMENT Housing Bank (GHB) will likely put its lending rates on hold for six to eight months in an effort to ease the interest burden on its borrowers.
The stance comes amid market expectations of further rises in the US Federal Reserve’s benchmark interest rate and a likely increase in the Bank of Thailand’s policy rate next year.
Bank president Chatchai Sirilai said the lender forecasts that its interest rates would rise by no more than 25 basis points, in line with the upward trend in the Thai policy rate and the US benchmark rate in 2018.
The bank’s eased stance on interest rates would likely see any rise put off for up to eight months to lessen the impact on borrowers.
“As planned next year, we expect interest rates to increase. Therefore, if the Fed and the MPC (the Bank of Thailand’s Monetary Policy Committee) hike their benchmark rates, these will not come as surprises for our balance sheet,” Chatchai said.
“We will put our rates on hold for around six to eight months. If others (other commercial banks) raise their rates, we may have to follow suit but later.”
The bank’s lending rate is the lowest among its peers’, or about 2.9 per cent a year, Chatchai said.
Typically, state-run banks raise their rates after commercial banks do so as the former have been established to help people, he said. Therefore, the state-run banks’ top executives are asked to consider the impact on borrowers before a rate increase.
He said that earlier, the bank had a housing loan programme with relatively low lending rates, which boosted its housing loans due partly to refinancing from other financial institutions. Now, applications for refinancing loans of about Bt4 billion are awaiting consideration.
Chatchai said that it would be relatively difficult to maintain its growth target of 8-9 per cent for new loans, due partly to the high base for comparison. By value, the new loans target for this year is Bt178 billion.
For next year, this target has been lowered to a range of 3-5 per cent, he said.
As of October 16, the bank extended new loans worth Bt126 billion this year.
The bank expected the value of new loans to come in close to the target this year, possibly up to Bt1 billion above or below the mark, Chatchai said.
At the end of the third quarter, the value of the bank’s outstanding loans was Bt980 billion, up 4.67 per cent from the end of last year. Next year’s figure is estimated to reach Bt1 trillion. Its non-performing loans, after a Bt6.97 billion write-off, were 4.61 per cent of the total.
Chatchai expects the bank’s profit to come in as targeted, at Bt11 billion. For the first 10 months of this year, its profit stood at Bt9 billion.
He cited lower costs, to 2.1 per cent from 2.4 per cent, as a result of its funding management that helped achieve the increased profit.