Experts, real estate giants welcome MPC rate cut, wary of bank lending

Argue that Thai interest rate cuts have been smaller than those of neighbouring countries

The business sector has widely welcomed the decision of the Bank of Thailand’s Monetary Policy Committee (MPC) on February 26 to reduce the policy interest rate by 0.25%.

The unanimous decision cuts the interest rate from 2.25% to 2% per year, effective immediately. 

This decision came after the last policy rate adjustment in October 2024. However, while this move helps reduce costs for businesses and homebuyers in the short term, the long-term impact could be detrimental to the overall industry if financial institutions remain strict in their lending practices, experts said.

Pornnarit Chuanchaisit, president of the Real Estate Association, noted that although the rate cut was welcomed by business operators, it needed to be considered in the broader context of the interest rates of major countries. The downside of the rate cut is that foreign capital might flow out due to uncompetitive returns on investment. Meanwhile, the long-term effect of the rate cut is not significant as financial institutions are still reluctant to lend.President of the Housing Business Association Sunthorn Sathaporn said that the policy interest rate reduction is a positive sign for the real estate industry. It will reduce financial costs for business operators, leading to an increase in loan requests from the public. This can stimulate investment in riskier assets, such as the stock market, as returns from fixed-income securities decrease, prompting investors to shift their focus to equities.

The head of research and consulting at Cushman & Wakefield Thailand, Surachet Kongcheep, believes that the MPC's interest rate cut would help create a more vibrant atmosphere in the real estate market, encouraging more property purchases. He also expects banks to continue to lower mortgage loan interest rates.

The managing director of Sena Development Pcl, Kessara Thanyalakpark, believes that the reduction in the interest rate will boost purchasing power and reduce the financial burden on borrowers. If the interest rate reduction had not been made now, it would have been too late because the market has been severely damaged, and purchasing power has diminished, he said.From a business operator's perspective, the government should support long-term low-interest loans at a fixed rate of 3% for 20 years. For example, a 1-million-baht house could be paid off with monthly payments of 3,000 baht instead of the usual 6,000 baht, making homeownership more accessible. This model has been implemented in countries like the United States and Japan.

The CEO of Sansiri Pcl, Poomipak Julmanichoti, said that all sectors support the interest rate cut to promote loan growth, as the sector has not grown for a long time. Thailand’s interest rate cut has been relatively small compared to its neighbours, resulting in a higher cost of living.

(2025/03/02-00:00)