• In a joint discussion between the Bank of Thailand and operators in the real estate and construction sectors, one proposal raised was the relaxation of loan-to-value (LTV) regulations governing mortgage lending, known as LTV measures, for second and third home purchases to stimulate the residential market.
• In 2024, the overall home loan portfolio of financial institutions recorded a modest 2.6% growth in outstanding home loans, representing a 23-year low (Figure 1). This was primarily driven by a deceleration in home loan growth within the commercial banking system (0.3% growth) and Specialized Financial Institutions (SFIs) (5.4% growth).
• Looking back at two key periods when LTV measures were relaxed, in 2009 and 2021, KResearch found that the effects on mortgage lending within the Thai banking system differed in each case (Figure 2 and Figure 3). Following the easing of LTV rules in 2009, housing loans in the banking system rebounded sharply. In contrast, after the LTV relaxation in 2021, although outstanding housing loans continued to decline, the easing of LTV measures only marginally helped support a gradual recovery in new mortgage lending.
• KResearch believes that relaxing LTV measures for second and third mortgage contracts may help boost new lending, particularly among prospective middle- to upper-income borrowers for whom financial institutions can manage credit risks. However, the overall impact on housing loans is likely to remain limited due to the broader economy’s slow recovery, which adversely affects income, purchasing power, and household debt.
• It is projected that housing loans in the Thai banking system will expand by 0.5 percent in 2025, assuming the Thai economy sustains continuous growth and the lending rate decreases during the remainder of the year (baseline case where the LTV measure has not been adjusted), compared to the 0.3 percent recorded in 2024.
• Although the BOT has not ruled out the possibility of adjusting the LTV criteria, other factors must be carefully considered, including speculative signals, housing demand, and the remaining supply in the market. Close attention must be paid to further details of the LTV measures, as they will impact mortgage applications for second and third home purchases, as well as residential properties priced above THB10 million, which together account for approximately 10 percent of the market. If the proportion of borrowers in this segment increases by 1 percent of the overall market, it could potentially boost housing loan growth by around 0.1–0.2 percent from the baseline, assuming the measure takes effect in the second half of 2025.
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