CIMBT keeps cheap mortgages

Selective strategy controls asset quality

CIMB Thai Bank Plc (CIMBT) will keep its low teaser rates for mortgage loans unchanged to attract homebuyers despite other major commercial banks’ continued hikes of housing loan rates.

Mortgage interest rates for the first three years are lower than 3% on average.

CIMBT’s attractive rates are offered in the middle-to-affluent segments with earnings of 30,000 baht a month in order to control the asset quality of loan products, said executive vice-president Onanong Udomkantrong.

For instance, the bank offers an average rate of 2.85% for the first three years for homebuyers with a minimum monthly income of 30,000 baht who purchase housing at up to 2 million baht per unit.

CIMBT has an average mortgage loan rate of 2.89%.

The low-level interest rate is aimed at homebuyers who earn a minimum of 50,000 baht per month. The bank, however, requires several conditions for the loan package, particularly a loan-to-value (LTV) ratio of 70-85%, depending on the risk profile of the borrower.

Mrs Onanong said good asset quality is a key factor enabling the bank to offer low-level interest rates. With a good history of debt repayment and the financial discipline of middle and affluent homebuyers, the bank has set lower credit costs and loan-loss reserves for the business.

“Under a selective client strategy, the bank has not seen non-performing loans within mortgage loan offerings in the past year,” Mrs Onanong said.

CIMBT has focused on this market segment over the past few years, replacing the mass-market segment with its minimum monthly income of 15,000 baht.

Mortgage loan customers with a minimum income of 30,000 baht represent 90% of the middle-to-affluent segment.

From the beginning of this year, the bank expanded loan packages to upperincome homebuyers with minimum earnings of 50,000 baht and 100,000 baht per month.

CIMBT maintains a housing loan baddebt ratio of around 2% with a total mortgage loan portfolio of 72 billion baht.

According to the Bank of Thailand, housing NPLs in the banking sector for the second quarter made up 3.39%, with negative signs prevailing at large. Homebuyers’ lower debt payment ability when faced with floating interest rates after the end of fixed rates in the first three years was a key cause of the higher NPL ratio.

“Some clients at other financial institutions have refinanced mortgage loans at CIMBT because of its attractive rates,” Mrs Onanong said.

For the first seven months of this year, CIMBT booked new housing loans of 11 billion baht. The bank expects 18 billion baht in new home loan bookings throughout this year.

Some clients have refinanced mortgage loans at CIMBT. ONANONG UDOMKANTRONG Executive vice-president, CIMBT