Thailand scraps mortgage lending cap to support fragile economy

[BANGKOK] Thailand's central bank temporarily suspended home-mortgage lending limits to revive the sluggish property market and pandemic-hit economy, fuelling a rally in shares of real estate developers.

Home buyers can now take loans equivalent to 100 per cent of the property's value until the end of 2022, the Bank of Thailand (BOT) said on Thursday (Oct 21). That is up from a loan-to-value range of 70-90 per cent previously, with that ceiling dependent on the type and number of houses purchased.

The mortgage move is aimed at boosting the property sector and related businesses, which account for 9.8 per cent of Thailand's economy and employ 2.8 million people, BOT assistant governor Roong Mallikamas told a news briefing on Thursday.

Making home loans easier is the latest in a slew of "targeted measures" unveiled by the central bank in recent months to bolster Thailand's fragile economic recovery as it preserves the limited monetary-policy space available after cutting interest rate to a record low of 0.5 per cent to combat the pandemic.

"The outbreak has hurt our economic recovery significantly, so we need to have additional measures to help boost the economy," said Roong. "This unlock will help draw excess savings and pent-up demand for property from medium-to-high income groups."

A measure of Thai property developers rose as much as 1.7 per cent to its highest level in more than four months. Origin Property, Major Development and Nusasiri jumped more than 7 per cent. AP Thailand gained as much as 6.1 per cent, Pruksa Holding climbed 6 per cent and Supalai jumped as much as 11 per cent.

BOT foresees no risks to financial stability from any increase in speculation in the property sector because of the strong credit standards of financial institutions and the long-term ability of borrowers to repay debt, it said in a statement. The move will not exacerbate the nation's high household debt, as it mainly stems from personal loans and credit card spending, Roong said.

BLOOMBERG