CIMBT’s mortgage rejections ease
Purchasing power up as clients pay off debt
The rejection rate for mortgage applications at CIMB Thai Bank (CIMBT) has declined as prospective borrowers have paid off debt incurred from buying cars under the first-time car buyer scheme.
The lower household debt leverage bodes well for purchasing power.
The bank’s mortgage denial rate has fallen to more than 40% of total applications from 50% at the end of last year, said executive vice-president Onanong Udomkantong, adding that the improving economy and the completion of monthly payments for the first-car scheme have increased purchasing power and debt repayment ability.
The bank’s focus on middle- to upperincome earners who purchase homes in the range of 3-5 million baht is also credited with lowering the rejection rate.
The average mortgage rejection rate for the industry has fallen to 70% from 80% before, Ms Onanong said.
The banking industry is turning down more than 60% of potential borrowers in the mass-market segment with a maximum housing price of 2 million baht, and around 40% of those attempting to buy homes priced from 10 million.
The maximum credit line for a housing loan is 90-95% of the house price. When customers apply for additional loans for home decoration, the total credit line can increase to 100%.
Under Yingluck Shinawatra’s government, the first-time car buyer scheme offered tax rebates of up to 100,000 baht to buyers who bought passenger vehicles with a maximum engine capacity of 1500cc or pickup trucks with unlimited engine capacity, but priced within 1 million baht.
Car owners, however, are required to maintain ownership of the vehicles for five years if they want to avoid returning their tax rebates.
The scheme was judged to have created artificial demand, causing a spike in domestic car sales at that time and, mostly importantly, putting many car buyers into high debt leverage as they made small down payments on the purchase with long loan repayment periods of up to 72 months.
Ms Onanong said the bank has managed to keep a lid on mortgage non-performing loans (NPLs) after shifting focus to the upper-income segment.
The bank’s ratio for housing NPLs has been steady at 3.8% for a while and is projected to see soured loans decline at the end of this year.
CIMBT aims for 15 billion baht in new mortgage loans and an 8-10% increase in housing loans outstanding at year-end.
The bank’s outstanding mortgages increased by 2 billion baht to around 65-67 billion. The bank considers its mortgage loan growth target to be reachable this year, on the back of positive economic signs, the purchasing power of homebuyers, and the
bank’s loan packages.
Yesterday CIMBT introduced two new home-for-cash loan packages with special interest rates.
The Mortgage Power package has an average interest rate of 5.55% per year
for the first three years, and the Property Loan package has an average interest rate of 6.66% per year for the first three years.
The bank’s interest rate is lower than industry peers by around 50 basis points on average.
The loan packages target salaried workers and government officers.
CIMBT shares closed yesterday on the Stock Exchange of Thailand at 1.15 baht, unchanged, in trade worth 2.83 million baht.