BOT relaxes loan-to-value rule in a bid to boost the property market

The Bank of Thailand (BOT) is temporarily relaxing the loan-to-value (LTV) rules in a bid to stimulate the slumping property market as well as related industries.

LTV is the ratio of the loan amount to the property's collateral value, expressed as a percentage, which lenders use to assess risk and determine loan terms.

From May 1 this year to June 30 next year, loans of up to 100% of the collateral value will be allowed for first homes costing more than 10 million baht, and for second homes costing less than 10 million baht, the central bank announced on Thursday.

The move is expected to help property developers sell their outstanding supply amid the contracting market, Somchai Lertlarpwasin, BOT’s assistant governor of Financial Institutions Policy Group, said.

After discussing with property developers, financial institutions, the Monetary Policy Committee, and the Financial Institutions Policy Committee, the BOT estimated that relaxing the LTV rule would help support the real estate sector and related businesses, and could potentially stimulate the overall economy to a limited extent, said Somchai.

He added that the LTV relaxation would not significantly increase risks to financial stability, as the current financial conditions are still tight, and lenders have been cautious about granting loans.

He reasoned that the relaxation would only be temporary as Thailand’s LTV measures were already lenient compared to those of other countries.