Mortgage growth forecast to plunge

Kasikorn Research Center (K-Research) expects 1.2% growth in mortgages within the commercial banking sector this year, the lowest level of expansion in 23 years.
The low rate is attributed to the diminished purchasing power of homebuyers.
In the second quarter of 2024, commercial banks booked marginal year-on-year growth of 0.8% in mortgage loans, down from 1% the previous quarter, said Kanjana Chockpisansin, head of banking and financial sector research at K-Research.
Ms Kanjana said the elevated household debt levels in Thailand, stagnant income growth and declining purchasing power and debt repayment abilities are the primary factors hindering the expansion of mortgages.
This slowdown in mortgage lending affects both high-rise and low-rise housing projects.
“We anticipate only marginal growth of 1.2% in mortgages this year, the lowest in 23 years,” she said.
“The younger generation will face greater challenges in accessing homeownership because of reduced purchasing power.”
The credit line for new housing loans per account has increased compared with previous periods, as banks now target upper-income segments for loan approvals, aiming to maintain asset quality, noted the research house.
To ensure adequate debt repayment capability, a homebuyer’s monthly income should be around 50,000 baht to purchase a condo priced at 3 million baht, while an income of 76,000 baht per month is needed to buy a home valued at 4.6 million baht, according to K-Research.
The centre said despite the decline in new mortgages, housing refinancing loans continue to rise.
As of the second quarter this year, refinance loans accounted for 21.3% of total new mortgages, up from 13.6% at the end of 2023.
The research house predicts the banking sector’s non-performing loan (NPL) ratio for mortgages will exceed 3.9% of total outstanding loans by year-end, an uptick from 3.71% as of June.
However, both stage 2 mortgages and mortgage NPLs for residences priced less than 10 million baht have risen since the fourth quarter of last year.
Similarly, stage 2 mortgages for houses priced between 10 and 50 million baht have increased, primarily among upper-income individuals and small business owners.
Stage 2 housing loans refer to a classification considered to have increased credit risk, typically indicating the borrower is still meeting their contractual obligations, but may be showing signs of financial stress.
The research unit anticipates the Bank of Thailand’s responsible lending (RL) approach will limit the creation of large new debts for individual borrowers.
In the next phase of RL, the central bank plans to implement a debt service ratio of 60% for retail borrowers with monthly incomes of less than 30,000 baht, and 70% for those earning more than 30,000 baht.