Despite the overall downward trend of interest rates, mortgage rates are unlikely to be cut at present as banks need to maintain their margin at the current level.

Siam Commercial Bank (SCB)'s senior vice president for direct sales in Bangkok, Duangkamon Chaiyapuntu, said her bank had no policy to cut mortgage-loan interest rates at present, saying they stand at a suitable level.

The Government Housing Bank (GHB) was the first bank to announce a mortgage-loan rate cut, of 25 basis points. However, Duangkamon said the cut would not have an impact on Siam Commercial because her bank and GHB have a different customer base.

Similar to other large banks, however, SCB, the country's third-largest bank, has selectively decreased fixed-deposit rates by 25 to 50 basis points.

Bangkok Bank president Chartsiri Sophonpanich recently said that bank lending rates would possibly decrease in the first quarter this year.

Amid an uncertain political environment and tougher busi-ness competition, it is not easy

for SCB to maintain its No-1 ranking in the housing loan market.

In addition, most banks have

set aggressive goals for housing loan expansion for this year, Duangkamon said.

In the commercial banking industry, SCB currently holds

the largest market share. To maintain the spread between its lending and deposit rates, SCB will not focus on a pricing strategy this year. Instead the bank will concentrate on other marketing strategies, in particular cooperation with business partners in the real-estate sector to provide loan services to homebuyers.

"Pricing strategy will be neglected this year as mortgage loan competition is still heating up. Otherwise the bank's margin would be narrowed," Duangkamon said.

The bank has targeted new mortgage lending of Bt50 billion this year, lower than the Bt53

billion projected for 2006. However, the bank failed to meet its loan expansion target and made only Bt50 billion in new loans. As a result, it has set a reasonable goal this year that is more in line with the country's political and economic situation.

Bangkok Bank is also keeping its housing loan interest rate unchanged. The country's largest bank said it would wait and see the market situation. There is no signal for a rate adjustment at present, said executive vice president Rachanee Nopmuang when asked whether the bank would cut its housing loan rate.

The new player Land and Houses Retail Bank said it would not change its mortgage loan interest rate. As a small bank, it would have to wait for the rate movements of large banks before making a decision, president Sasitorn Phongsathorn said.

The new bank aims to provide new lending of Bt30 billion this year, of which 80 per cent is expected to be home loans. Last year, the retail bank made new lending of Bt16.8 billion.

Somruedi Banchongduang

The Nation