Housing loans in 2007 are likely to post slowing growth. KASIKORN RESEARCH CENTER (KResearch) forecasts that new home loans in the system may grow in a range of 8-10 percent to total some THB1.4507-1.4770 trillion this year, against THB1.3426 trillion in 2006. In the best-case scenario with better economic growth, declining interest rates by 0.25-0.50 percent from present levels, and an improved political situation, the mortgage market would likely emerge from the trough during the latter half of this year when lending rates are expected to fall further. In the worst-case scenario, political setbacks would adversely affect the overall economy and consumer confidence toward the economic outlook and their future disposable income. Against this, the housing market would falter and consumers would put off homebuying decisions further.
With regard to competition in the home loan market, KResearch takes the view that the rivalry will become stiffer in 2007 despite many negative factors that may influence decision-making by potential homebuyers. Similar to other businesses, financial institutions will adjust their marketing strategies to accommodate changing consumer behavior, particularly in the midst of the economic slowdown. Among the marketing strategies likely to be adopted by financial institutions this year are:
Price competition Even though most financial institutions may try to avoid competing head-on with one another in terms of pricing, it is undeniable that prices will remain the key factor when it comes to homebuying, especially, in an environment of a slowing economy and a bearish interest rate trend. KResearch views that emphasis will be placed on short-term fixed rate packages (where the rates offered will be lower than the current rates) for periods of 1-3 years, followed by floating rates over the remainder of the mortgage term to help spur homebuyers.
An emphasis on giving financial consultationsRendering information and advice concerning the home loans will be an important factor because such suggestions to consumers before they decide to buy will prevent them from being denied or not getting the desired credit line. Cooperation with real estate entrepreneurs following the slowing economy, all developers are hastening the sale of their homes, particularly the completed, ready-built homes. On the part of financial institutions, they also want to expand their loan bases to meet their designated loan targets. Therefore, cooperation between real estate developers and financial institutions giving them financial support will be another strategy amid the intensifying competition both in real estate and home loan businesses where consumers are postponing home purchases. However, amid the intensifying rivalry in the home loan business, financial institutions are all competing to launch new products, offering attractive lending rates and sales promotions with more emphasis on quality service to spur homebuying decisions and stimulate home loans. At the same time, loan providers should increase their caution in considering the debt servicing ability of borrowers during the economic slowdown to prevent higher risk.
An interesting issue for homebuyers to consider, will be that those who want to buy houses should study information carefully or ask for advice from financial institutions before requesting home loans. Such information will prevent loan from being rejected or falling short of the requested credit line, particularly after the customer has already made all installments of the down payment. In addition, buyers should check the viability of the project, including the location before making any decision in order to avoid problems later on. KResearch views that those who want to buy a home right now are tending to postpone decisions beyond the first half of the year because of politics and the economy. Also, falling interest rates after the BOT meeting in April is another reason to procrastinate. Buyers would of course want to see the lowest lending rates, which are more likely in the final half of the year. If interest rates go lower, that could stimulate homebuying decisions somewhat.
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