On May 24, 2019, Mr. Chatchai Sirilai, Managing Director of the Government Housing Bank (GHB), revealed that the Fiscal Policy Office (FPO) of the Ministry of Finance has called GHB and the Government Savings Bank to provide information on the impact of the Bank of Thailand's (BOT) loan-to-value (LTV) measures on property loans. This is to discuss with the BOT about relaxing the lending conditions for state-owned banks, which primarily provide loans to low-income earners and first-time homebuyers.

          He acknowledged that GHB has been significantly affected by the LTV measures. In the first quarter of 2019, particularly in March, loan approvals reached 19 billion baht as borrowers rushed to secure loans before the LTV measures took effect in April 2019. In contrast, loan disbursement in April was only 9 billion baht, while the annual average is between 13 to 15 billion baht. This decline is partly due to the LTV measures and the numerous holidays in that month.

          For the first half of May 2019, loan disbursement dropped by 30-35%. If this trend continues, GHB will likely lend less than the target of 60 billion baht, which is set against a goal of 203 billion baht. The outcome depends on whether the Ministry of Finance can negotiate with the BOT to relax the LTV criteria for state-owned banks.

          "The LTV measure is a good policy that theoretically suits the regulation of property loans for commercial banks dealing with high-income clients. Setting a limit of 95% of the appraised value does not affect high-income earners. However, the LTV measure is not suitable for GHB, which serves low-income clients and first-time homebuyers. For example, a loan of 1 million baht requires a down payment of 50,000 baht, which is a significant challenge for low-income earners, severely impacting GHB's first-time homebuyer loans," Mr. Chatchai stated.

          He further mentioned that the bank believes that with a new government in place, there will be additional measures to stimulate the property market, including low-interest loans and relaxation of the LTV criteria. The interest rates for the second half of the year are expected to remain stable, as the BOT is unlikely to raise the policy interest rate during a period of economic slowdown.

          Regarding the loan disbursement for the One Million Houses project, in the first round, 127,000 applicants registered, with 7,300 loan applications submitted amounting to 5.2 billion baht. So far, 6,300 loans have been approved, totaling 4.3 billion baht, averaging 400-500 million baht in loans per month. The bank plans to open applications for the second round in September 2019, with an initial loan budget of 50 billion baht approved by the Cabinet, extending the loan period from the end of 2020 to 2024.

          In terms of the progress of issuing GHB savings lottery tickets worth 100 billion baht, the first series will be the Premium Lottery, "Viman Mek," with a unit price of 1 million baht and a budget of 27 billion baht. Draws will occur on the 16th of each month, with 27 prizes of 200,000 baht each. The lottery has a three-year term, allowing holders to win up to 972 prizes, with a winning chance of 0.1%. After three years, the return on the lottery will be as high as 1.4% per year, equivalent to fixed deposits. If a holder wins just once, the average annual return will rise to 8.07%. The lottery can also be passed on as an inheritance, with the first draw expected in September.

          For the other two lottery series, priced at 10 million baht per unit with a budget of 30 billion baht, draws will occur quarterly, with prizes of 3 million baht, totaling 3-5 prizes. The bank has clarified to its employees that GHB's lottery is about selling returns and opportunities, unlike other lotteries with a winning chance of only 0.0001%.

          Meanwhile, the GHB lottery priced at 500 baht per unit, with a budget of 50 billion baht, is expected to be available for sale early next year. The funds raised from all lottery sales will be allocated specifically for low-income earners at a low-interest rate not exceeding 3%, as the cost of issuing the lottery is about 1.7%, compared to the average costs of other banks, which range from 1.9% to 2.1%.

          "Currently, the process of issuing GHB lottery tickets is awaiting an announcement from the Revenue Department regarding the exemption of income tax on winnings and interest from lottery purchases. Interested buyers of the Premium Lottery, "Viman Mek," priced at 1 million baht, will need to deposit funds with the bank to reserve their rights in June. After that, the tickets are expected to be delivered to the applicants in August, with the first draw on September 16, 2019," Mr. Chatchai stated.

          Looking ahead, the bank plans to implement a reverse mortgage housing loan program for the elderly, with a budget of 1 billion baht to assist seniors who own their homes outright and are debt-free. They can mortgage their homes with the bank to receive monthly payments. The pilot area for this program will be in Bangkok and its vicinity, targeting borrowers aged 60 to 80 years, with a maximum loan amount of 50% of the appraised value and not exceeding 10 million baht, without considering the borrower's income. The interest rate will be fixed at 6.25% per year for the loan term, which can last up to 25 years or until the borrower turns 85. The bank will provide monthly payments; for instance, a loan of 2 million baht for a 65-year-old borrower over 20 years will yield monthly payments of 8,300 baht. Currently, 4-5 interested parties have inquired with the bank.

          Mr. Laworn Saengsanit, Director of the FPO, stated that the FPO is currently monitoring the impact of the LTV measures on state-owned banks to see if home loan disbursements continue to decline. Before the measures took effect, there was a rush to transfer ownership, leading to a decrease in transfer volumes in April. It will be necessary to observe whether this decline is temporary or a permanent monthly reduction to discuss accurately with the BOT.

          However, the BOT has previously argued that the LTV measures do not affect first-time homebuyers, as they are intended to regulate loans for second and third homes to prevent speculative purchases and loans with cash withdrawals. The BOT found that some commercial banks were lending up to 110-115% of the appraised value for home purchases, necessitating these measures to maintain stability. Therefore, the true impact of these measures will need to be observed over time.

 

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