The government is being urged to introduce 20-year fixed-rate mortgages to assist low-income individuals in securing loans, helping to overcome a significant hurdle for many Thais aspiring to homeownership.
Kessara Thanyalakpark, managing director of listed developer Sena Development, suggested that Thailand could implement Japan’s mortgage packaging model to enhance accessibility for lower-income homebuyers, particularly for vulnerable groups.
For example, individuals earning approximately 10,000 baht per month who are looking to purchase homes valued at 1.5 million baht or less could greatly benefit from such a scheme, Ms. Kessara noted. The monthly payments for this loan package would average around 3,000 baht.
Japan’s long-term fixed-rate mortgage model offers a 30-year loan term, featuring a fixed rate for the first 20 years and a floating rate for the final 10 years. This model is designed for vulnerable homebuyers and receives financial support from the government through specialized financial institutions.
Ms. Kessara pointed out that slow economic growth and stagnant income levels have made it increasingly challenging for Thais to obtain mortgages for home purchases. The loan rejection rate for Sena’s residential projects has surged to an average of 60-70%, up from 30-40% previously.
She explained that loan rejections arise from both financial institutions and the applicants. Banks often deny loan applications due to borrowers’ limited debt repayment capacity, which stems from a sluggish economy and the growing disparity between income growth and rising property prices.
In recent years, consumer income growth has averaged around 1%, while property prices have escalated by 6-7%, attributed to escalating operating costs, particularly for raw materials.
“Some applicants even decline loans after receiving approval because they lack confidence in the economy and are hesitant to commit to long-term debt agreements spanning 20 to 30 years,” added Ms. Kessara.
Regarding the new government’s economic policy emphasizing solutions for household debt, she stressed that implementing this mortgage option should be a priority, encompassing both formal and informal lending, as it significantly impacts homeownership.
“If the Bank of Thailand begins to lower its policy rate in December, as the market expects, it could help bolster demand among homebuyers. However, mortgage interest rates remain a crucial factor in determining access to financial products for prospective homeowners,” concluded Ms. Kessara. “Generally, the property sector—encompassing both new project investments by developers and mortgages—remains closely linked to interest rates.”
