The Bank of Thailand (BOT, Baa1) announced measures to tighten credit underwriting standards in mortgage loans.
Under the new rules, the maximum loan-to-value (LTV) ratio will be restricted at 80% on new mortgages for homes worth more than 10 million baht.
The same LTV restrictions will apply for the purchase of a second home irrespective of the property value. Banks will also be prohibited from providing advances that exceed the value of a property.
New measures to target speculative buying
The new mortgage-lending rules are credit positive because they will help to reduce speculative buying and require banks to focus on borrowers with better credit quality.
We expect the measures to improve the asset qualilty of banks’ newly originated mortgage loans. Amid Thailand’s prolonged low interest rate environment, property prices have been rising steadily.
A 78% increase in condominium prices
According to the Bank for International Settlements, residential property prices in the Bangkok area have increased 49% in the past 10 years; nevertheless, the increase in condominium prices has been sharper at about 78% during the same period.