With the inevitable inflation situation for more than half the year, it is expected that the upcoming MPC meeting in August has a high chance of raising the policy rate to curb inflation. because it is a factor that greatly affects the economy. It is expected that if there is a real interest rate increase, it will automatically lead to a home interest rate hike.
Mr. Ekasit Pruitthiphalakorn, Product Manager of Retail Business CIMB Thai Bank, revealed to the “Prachachat Business” estimated that the Monetary Policy Committee (MPC) is expected to raise the policy rate by 0.25% at the August meeting, which will affect “mortgage” and cause the cost of living to rise due to the increase in installment payments.
For new contract customers, if the MPC raises interest rates by 0.25% in the case of a 1-million-baht home loan, there will be a payment of 4,500 baht per month, resulting in an increase of 4-5% or about 250 baht per month, making the installment amount increase to 4,750 baht per month.
However, for existing customers, even if the interest burden increases immediately, the installment will not be affected. This is because the bank has already buffered the movement of interest up and down in the interest calculation by 0.50-0.75% over the term of the contract. But the balance in each period will have more interest deductions. reduce the principal deduction This means that the debtor has to pay longer.
The interest rate hikes for home loans are usually proportional to or close to the policy rate. There should be an adjustment after the Bank of Thailand (BOT) adjusts the policy rate for 1-2 months.
Mr. Ekasit said for new customers who are making the decision to buy a home, they will receive higher interest rates and higher installments. House prices tend to increase in line with rising construction material prices. and after the Bank of Thailand signaled an uptrend in interest rates. The financial institution reduced the products that offered a fixed interest rate. As before, with a fixed interest rate for the first 3 years, the remainder offered a fixed interest for no more than 6-12 months or considered on a case-by-case basis.
“If the MPC raises interest rates by 0.25%, banks will have to raise both loans and deposits. Running a fixed interest campaign will be less, because the longer the fixed rates, the higher the bank’s cost. Consequently, banks will focus on adjusting to floating interest rates to cope with the rising interest rate trend. As for CIMB Thai Bank, there is no fixed interest campaign.”
Meanwhile, for refinanced home loans, interest rates will be adjusted similarly to new home loans. due to higher bank costs and sources of funding that come from the same source, which is deposits. However, refinancing home loans typically charge a lower interest rate than new home loans, on average 0.50%,
Mr. Churat Chakarakul, Managing Director, Lalin Property PC, told “Prachachat Business” that an uptrend in interest rates has led banks to consider fewer promotional loans, especially fixed-rate campaigns. The impact on real estate customers increases the burden of housing installments. Roughly calculated, the interest rate increases by 1%, increasing the installment burden by 7%-8%. Therefore, every time the MPC raises the interest rate by 0.25%, it will affect the value. Installments increase by 2% per year, including applying for a loan, resulting in a lower loan amount.
“The trend of rising interest rates in 2022, no matter how much they rise, But compared to the past 10 years, it’s still lower than in the past. This round has to gradually adjust the strategy by working with financial institutions partners. and adjust the loan promotion to help customers. “
The adjustment of entrepreneurs must turn to controlling costs, developing projects and managing cash flow well. Along with training the sales team to be a one-stop service, giving advice to customers who are borrowers, such as what occupation is suitable for applying for any bank loan, in order to create opportunities to borrow. At the same time, if it is a customer of Lalin, 4-5 financial institution alliances, which are Bangkok Bank, Kasikorn Bank, Siam Commercial Bank, Government Housing Bank, and TMB, there will be a special interest rate minus 25-75 satang, which can help a lot.
In terms of loan rejection rates, it was found that the overall market was at 50%, while the customer portfolio of Lalin was only 20–25% because the company had a loan screening system or pre-approved before placing the reservation. Therefore, most customers who go through this process will be able to borrow money through and accept home transfers.
However, the trend of home loan promotion in the second half of 2022 is seen to be more intense competition. The fixed interest campaign will not disappear from the market. because it affects the decision to use credit. but the fix rate may be higher than before. In terms of the period that was used to make fixed interest payments for a long time, it may be shortened. For example, the fixed interest loan of Lalin never held 0% but chose to have a low interest rate. duration ranging from 6-12-18 months
For those who want to have a house, they need to expedite the purchase and transfer before the MPC meeting because there is still an opportunity to buy a house at the same price. Another meeting is scheduled for August 2022, which is expected to raise the policy rate. leading to an automatic home interest rate hike.