BoT unswayed by LTV relaxation requests

Even though property developers have asked for a relaxation of loanto-value (LTV) regulations, the Bank of Thailand sees no need to do so.

The central bank has closely monitored the market for both housing loans and speculative behaviour, and additional relaxation is not needed as mortgage co-signers are no longer required to comply with the regulation, said Ronadol Numnonda, deputy governor of financial institutions stability.

He said the central bank will continue to monitor the market.

According to the regulations, banks are allowed to offer an LTV of 100% in mortgages for buyers of low-rise residential projects taking out their first mortgage.

“We don’t think the existing LTV regulation has any effect on low-rise property projects, so it will be maintained. However, the central bank is ready to listen to private sector,” said Mr Ronadol.

Developers have repeatedly called for the central bank to cancel LTV regulations for low-rise residential projects, applying them only for high-rise projects.

The central bank’s LTV regulation focused on two core areas: the financial discipline of borrowers and property speculation. Since the LTV regulation was implemented on April 1, speculative behaviour has reduced, said assistant governor Wajeetip Pongpech.

“The central bank cannot say definitively that the LTV rule is the sole reason mortgages and the property markets are slowing. Other factors could be at play,” she said.

The sluggish economy could lower debt repayment ability and also dent demand, said Mrs Wajeetip.

Homebuyers are required to make a minimum down payment for third and subsequent mortgages of 30% of the home price, with second mortgages set at 10-20%, depending on how long a borrower has made payments on the first one. The LTV ratio of 90-100% remains unchanged for those planning to buy a home priced below 10 million baht, but the ratio drops to 80% when the borrower buys a residence valued at 10 million baht or higher.

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The central bank cannot say definitively that the LTV rule is the sole reason mortgages and the property markets are slowing. RONADOL NUMNONDA

Deputy governor, Bank of Thailand