Financial institutions step up to help mortgage customers amid rising interest rates

Financial institutions are taking steps to assist mortgage customers in coping with increasing rates as Central Bank hikes impact floating mortgage interest rates. Thakorn Piyapan, president of TMBThanachart Bank (ttb), mentioned that the bank provided some mortgage clients with the option to raise their monthly debt repayment amount or prolong the loan period to alleviate the higher monthly debt burden due to rising interest rates.

So far, the majority of the bank’s mortgage customers have been able to keep up with their debt repayments despite the rising interest rates, according to Piyapan. He stated that if the Bank of Thailand raises its policy rate by 0.5 percentage points, many of ttb’s clients should still be able to manage their debt.

However, Piyapan noted that around 0.5% of mortgage clients might struggle with debt payments. If the central bank increases interest rates, these clients will not be able to reduce the principal amount under their existing contracts due to the higher monthly interest charges. Consequently, their debt repayment capability could weaken in the later years, particularly for mortgage contracts spanning 20-30 years. Piyapan said…

“The bank has offered 0.5% of its customers, who are likely to generate bad debt in the future, the option to increase the debt payment amount per month or extend the housing loan period. These measures would ease the financial burden of customers and help the bank to maintain good loan quality.”

Piyapan added that the number of affected clients is relatively low, and the bank expects to control the asset quality of this loan segment as interest rates rise. He pointed out that mortgage borrowers, particularly those with floating interest rates, are the primary concern rather than other types of borrowers.

Typically, banks offer a fixed interest rate for the first three years of a mortgage, after which the rate is based on the minimum retail rate (MRR). TTB, currently the country’s sixth-largest bank, offers an MRR of 7.38%. The MRRs of the five larger banks range from 6.85% to 7.12%.

Banks have raised their lending rates in response to the central bank’s policy rate hike. Economists predict that the policy rate will reach a terminal level of 2% this month, up from 1.75%.

Ekasith Phrutthipalakorn, head of consumer products at CIMB Thai Bank (CIMBT), stated that less than 0.5% of the bank’s mortgage clients would be affected by higher interest rates. Similar to ttb, CIMBT has allowed clients to increase their monthly loan payments or extend the loan maturity to ease their financial burden, reported Bangkok Post.