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Published on December 22, 2007

Heightened competition in extending new mortgages is credited with the improvement.

The LTV ratio represents the level of loans against the sales price of mortgaged properties. In a report entitled "Thai Residential Mortgage Market", the ratings agency said that in general, the LTV ratio for the provinces was lower than it was for Bangkok.

The report provides an overview of the Thai residential mortgage market in terms of products, loan growth, interest rates charged and mortgage-enforcement procedures, as well as a summary of Government Housing Bank (GHB) operations and its loan portfolio.

After taking a severe hit during the 1997 financial crisis, the Thai mortgage market started to recover in 2000. The robust growth seen from 2003-04 was supported by the recovery of both the economy and the property sector, as well as a low interest-rate environment. Since 2003, new housing loans have surpassed pre-crisis levels, although the mortgage market has slowed down somewhat since mid-2005.

"The slower home-loan growth over the past two years was a result of increased rates [from mid-2005 to 2006], persistently high oil prices and political instability, which affected consumer confidence and the domestic economy. The slowdown in loan growth was also witnessed in other consumer-finance sectors, including credit-card and auto-loan receivables," said Orawan Karoonkornsakul, senior director of Fitch Thailand's Structured Finance Team.

The GHB commands the largest market share among all players, about 40 per cent as of the first half of this year, although this is likely to fall, due to intensified competition from commercial banks. Its market share rose from about 30 per cent following the 1997 financial crisis, which severely affected the private banking system. Thailand's total outstanding housing loans totalled Bt1.4 trillion as of this past June 30.

The report also discusses the development of the local residential-property market, including property ownership, demographics, economic development, household debts, the housing market and property prices. Fitch's ratings process and general residential mortgage-backed securities ratings methodology are also covered.

The Nation