Home loan battle backed by real demand, says central bank
COMMERCIAL banks are expected to continue to compete for home loans with low lending rates with a view to their year-end performance targets, as the Bank of Thailand (BOT) observes medium-paced growth in home loans that is supported by real demand.
It is normal to see home-loan competition among commercial banks, said an anonymous source from the banking industry.
The pattern of competition has changed to low-interest campaigns for all groups of customers. Previously, low lending rates were offered only to prime customers.
“Today, the competition is fiercer, due partly to applications for home loans growing as expected,” the source said.
“So, have banks turned to extending more loans to this segment. Besides, now it’s coming up to the end of the year and banks may need to accelerate their efforts to meet their home-loans targets.”
Offering loans with low instalments for the first three years raises the prospect of greater risks for bad debts in the future, if the increased instalments after the first three years can’t be met, the source said.
Non-performing loans (NPLs) for mortgages rose to 3.26 per cent of total outstanding home loans in the third quarter, from the previous quarter.
Daranee Saeju, senior director for the BOT's financial institutions strategy department, said that rise in NPLs was due mostly to the high competition in the past three to four years that has low-interest offerings for the first three years of a loan.
Such competition boosted growth in home loans to 12-13 per cent during that time, she said.
However, she viewed the current competition for home loan, with low interest and low instalment for the first three years, as being not as high as that seen three to four years ago. In contrast, the growth in home loans is now only 5-6 per cent.
“Some of credit extension conditions are more stringent. Therefore, loan growth is not very high. Based on a report in September, we see a medium growth with rises in both demand and supply. Competition was not concentrated in a particular segment and we feel it's real demand,” Daranee said.
In regard to concerns over likely bad debts, the central bank viewed commercial banks' longer fixed lending rates for home loans, which is good for consumers who will see certain expenses and that means quality customers, she said.
Nathapol Luepromchai, executive vice president at Bank of Ayudhya, conceded there was high competition for home loans, but said the bank had been mindful of containing risks.
The bank's NPLs for home loans remained steady at 2.4 per cent and is expected to be 2.4-2.5 per cent at the end of this year.
Suwannee Wattanavekin, executive vice president at Kiatnakin Bank, said that the bank's extension of loans for both residential purposes and property development would likely remain steady next year and the bank will retain its existing customers within the lending limits to allow them have sufficient investment in their projects.
The bank's NPLs lowered to 5.6 per cent in the third quarter of this year, from 5.8 per cent in the previous quarter.
Suwannee expected the bank to see lower NPLs next year, due partly to sales of its non-performing assets (NPAs).
Presently, its NPAs are about Bt6 billion for 1,100 items. Of the total, 70 per cent are plots of land, half of which are in Bangkok and the other half in the provinces. The remaining 30 per cent are single houses, townhouses, condominiums and warehouses.