BoT: Govt’s housing loan not to cause bubble

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BANGKOK, 6 May 2011  – The Bank of Thailand (BoT) has confirmed that the government’s policy urging people to purchase their first house with borrowings from the Government Housing Bank (GH Bank) will not lead to an economic bubble in the property sector.

 

Although the loan is interest free during the first two years, BoT Deputy Governor for Financial Institutions Stability Krirk Vanikkul believed that it will not cause an economic bubble because it is limited only to first-house buyers. The offer is in response to actual demand, not for speculation.

Mr Krirk admitted that there might be some impacts on the financial system but the loan approval outlook of commercial banks this year should not be affected much since the GH Bank’s loan outlay for this project is only 25 billion baht, which accounts for a tiny slice in the total system.

The deputy governor added that each loan seeker can borrow not more than three million baht. He said the BoT deemed the policy beneficial for people wishing to have their first house although it might be considered a populist policy.

Commercial banks expected that housing loans this year would fall but the competition would be fiercer. Many commercial banks are expected to issue special promotions to compete with the state policy.