Property developers and mortgage lenders have requested the Bank of Thailand focus on reining in mortgages for third and subsequent home purchases, delaying the measures planned to go into effect in January for an additional six months.
Atip Bijanonda, president of the Housing Business Association, said many condo buyers in the inner city choose them as a second home to stay at on weekdays.
"The new measure should apply to third mortgages, as there are a lot of people who want to change their residence when their income increases or they have a family," he said. "While buying a second home, they will need to stay at the first one or wait to sell it with this new measure."
Mr Atip said the effective date of Jan 1, 2019 is too soon for many buyers who already decided to buy this year or earlier. These buyers will have no time to prepare for a decrease in loan-to-value (LTV) ratio, which would force them to seek additional money to get a unit transferred, since the down payment they have made, usually 10-15%, will no longer be enough for a mortgage loan under a required LTV of 80%.
Wisit Monaiyapong, former president of the Home Builder Association, said the new LTV should not apply to the self-built home market, as buyers in this segment are not speculators and generally don't borrow more than they can manage to repay.
Some developers are concerned about loan co-signers who are not real buyers and might buy a unit in the future. Co-signers would be considered as those borrowing for a second unit, even if they did not purchase one previously.
Wajeetip Pongpech, assistant governor for the central bank's financial institutions policy group, said the bank will consider the private sector's concerns and provide feedback before mid-November.
"This is a preventive measure," she said on Thursday during a public hearing. "It is not aimed at solving a property bubble or oversupply, but building a standard for debt incurred. We will monitor debt incurred, whether for residence or investment."
The central bank is taking comments and suggestions about the new LTV ratio, which is scheduled to be enforced from Jan 1. People can submit comments at www.bot.or.th until Oct 22.
Mortgage lenders' opinions
Banks called for the central bank to reduce the proposed 20% minimum down payment for second mortgages, pointing out that second homes are necessary for consumers because they save on travel expense and offer convenience, a source in banking circles said after participating in the hearing on the measures offered by the central bank.
With changing lifestyles, more people need second homes for a living, the source said.
Most homeowners have suburban first homes, so they need condominiums located in downtown areas, the source said, noting that this lifestyle suggests that second homes are real demand rather than the search-for-yield behaviour that the central bank aims to curb.
The source's bank tightened mortgage loan approval for third homes by demanding a lower LTV ratio than the central bank's guidance.
Mortgages extended to houses priced at 3-5 million per unit dominate the bank's mortgage portfolio, while those for residences priced above 10 million baht are minimal, the source said.
The central bank uses risk-weighted guidelines to control mortgage lending. The risk weight assigned to mortgage loans is only 35% if the LTV is less than 95% for low-rise residential property units, 90% for high-rise units and 80% for housing units priced over 10 million baht.
If the LTV ratio exceeds these guidelines, the risk weight will increase to 75%. Top-up loans are not included in the calculation of the LTV ratio at present. A top-up loan is a loan made to a property buyer on top of the mortgage.
The source's bank also proposed the central bank push back enforcement of the new mortgage requirements, expected on Jan 1 next year, as banks need more time to revise internal operating processes, especially for a risk-weighted approach.
GH Bank president Chatchai Sirilai said the bank will discuss the hearing at this month's board meeting.
Under the central bank's new guidance for mortgage loans, GH Bank is concerned that lower- and middle-income homebuyers will be adversely impacted.
The state-owned bank has found that some requirements remain unclear.
