Impact of higher interest rates on Thai businesses and homebuyers
Concerns are rising among industry leaders that higher interest rates could negatively impact businesses, particularly small ones, and weaken the purchasing power of homebuyers. The Bank of Thailand’s Monetary Policy Committee recently voted to raise the policy rate to 2.00% from 1.75%, prompting state and private banks to follow suit.
The Federation of Thai Industries (FTI) warns that higher interest rates will pressure manufacturers to increase goods prices, causing distress for struggling small and medium-sized enterprises (SMEs). Kriengkrai Thiennukul, chairman of the FTI, says that increased interest rates lead to greater financial costs, making it difficult for some companies to maintain product prices or even continue operations.
The property market is also likely to be affected, with the Real Estate Information Center (REIC) suggesting that an interest rate hike would significantly weaken the purchasing power of homebuyers. Vichai Viratkapan, acting director-general of the REIC, believes that higher interest rates will have a strong impact on residential sales and transfers, limiting the capacity to purchase and borrow.
Small and medium-sized hotels could also face increased financial burdens due to higher interest rates, as most are in the early stages of resuming their business, according to Marisa Sukosol Nunbhakdi, president of the Thai Hotels Association.
In response to the rate hikes, some banks are offering mortgage customers the option to increase their monthly debt repayment amount or extend the loan period to ease the higher monthly debt burden.
