The Bank of Thailand (BOT) has announced that it will not extend the easing of the minimum down payment measure on housing loans or the LTV measure from January 1, 2023. This is another negative factor for the real estate market, along with rising interest rates and rising construction prices.
The reason why BOT considers the termination of LTV mitigation measures possible is the accumulation of risks in the financial system. To support citizens after the pandemic, it was possible to buy real estate with a mortgage without a down payment. This will be canceled in order to prevent excessive growth of citizens' debts, reduce credit risk, reduce the risk of speculation in real estate, which may lead to problems with the stability of the financial system.
The COVID-19 outbreak has seriously affected the Thai economy, so the Bank of Thailand sees the need to soften the LTV criteria as another tool to take care of the Thai economy.
Since the end of last year, the recovery of the Thai economy has continued. And the expected economic growth next year will be higher than the economic growth this year. Therefore, it is believed that preferential measures will no longer be needed. Although the cancellation of the LTV measure will directly affect the demand for housing loans and the demand for real estate.
But the economic situation is still continuously recovering. LTV preferential measures apply only to those who take out a loan to buy a home worth more than 10 million baht or a second and subsequent loan to buy a home.
While most of the housing (almost 90%) purchased with a mortgage is real estate with a price of less than 10 million baht. The first mortgage loan of up to 10 million baht can be without a down payment and without preferential DEMOGRAPHIC measures.