BAY to raise rate on mortgage demand

Bank of Ayudhya (BAY), the country’s fifthlargest bank by assets, plans to raise the interest rate of its introductory teaser rate mortgage by at least 25 basis points this half, following stronger housing loan demand in the first half.

The bank is considering raising the teaser rate and shortening the fixed interest rate period of the teaser loan, which now lasts for up to three years, said Nathapol Luepromchai, executive vice-president and head of the mortgage loan division.

“It will be more difficult for borrowers to get mortgage packages that, on average, charge interest rates below 3% annually for the first three years, or comprise the threeyear fixed interest rate. The re-pricing is in line with an improving economy and higher mortgage loan demand,” he said.

The banking industry’s mortgage value is estimated at 673-698 billion baht this year and its growth rate will be 6-10% year-onyear if the forecast holds.

Outstanding housing loans are expected to grow by 6-8% to 3.79 trillion baht in 2018 on the back of property market expansion spurred by both new local players and foreign developers.

Rising consumer confidence on the back of a growing economy, and the faster-thanexpected interest rate trend are other key factors influencing homebuyers’ decisions.

But Mr Nathapol said that re-pricing mortgage loans will not deal a blow to the debt-servicing ability of both existing and new customers due to the marginal rate increase.

Over the past 10 years, the policy rate has changed by no more than 200 basis points.

BAY has predicted the Bank of Thailand would lift its policy rate by a quarter percentage point late this year.

New borrowers will feel a significant impact in the event of a rapid increase in prime interest rates, minimum lending rate, minimum retail rate and minimum overdraft rate, he said.

BAY is aiming for 11% growth in new housing loans to 63 billion baht and 240 billion in outstanding mortgages by year-end.

Year-to-date, the bank managed to hit its mortgage targets.

The bank is looking to keep its nonperforming mortgages capped at 2.4-2.6% by year-end.

Borrowers who own houses priced between 2-10 million baht are the bank’s key target, as the risks are low.

Mr Nathapol said the bank plans to roll out a digital mortgage lending service, becoming the country’s first bank offering digital lending for secured loans.

BAY closed yesterday on the Stock Exchange of Thailand at 39.75 baht, unchanged, in trade worth 14.8 million baht.