Thailand’s residential property sector is grappling with a severe credit crunch, as mortgage rejection rates have surged to an unprecedented 80% this year, up sharply from around 30% during the pandemic, according to developers.
This alarming figure underscores a deepening crisis that is suppressing both home ownership and developer growth. The soaring rejection rate has created a dual shock within the market.
On one side, a generation of prospective buyers is being locked out of home ownership. On the other, listed developers are facing a sharp downturn, with transfer volumes and revenue not only missing targets by a wide margin, but also plunging year-on-year.
Q: WHY ARE MORTGAGE REJECTION RATES SURGING?
In general, the surge in mortgage rejection rates stems from two key factors: borrowers’ lack of financial readiness and banks’ increasingly stringent lending criteria, both of which are linked to the slowing economy and Thailand’s mounting level of household debt.
One of the most significant issues is prospective borrowers’ high debt burden, particularly when it comes to household debt.
Household debt climbed to more than 90% of GDP in 2022, well above the Bank of Thailand’s comfort zone.
Although the ratio eased slightly to 86.8% of GDP in the second quarter of 2025, banks have maintained tight lending standards, making mortgage approval more difficult.
Another major factor is poor credit history, as many mortgage applicants remain on credit blacklists due to late payments, loan defaults, or existing non-performing loans (NPLs), reducing their creditworthiness in the eyes of prospective lenders.
Applicants with unclear or unstable sources of income also face significant challenges. Freelancers and self-employed individuals with fluctuating earnings are subject to more stringent scrutiny, as banks require steady, verifiable income streams.
Other contributing factors include incomplete borrower qualifications, such as insufficient income, employment history, or the prospective borrower’s age not aligning with the repayment term.
There are also problems with collateral valuation, including appraisal values falling below the purchase price or legal complications surrounding the property.
In some cases, homebuyers take on new debt after passing the bank’s preliminary loan screening, mistakenly believing their mortgage has already been approved, even though the official transfer date has yet to arrive.
While waiting for the transfer, they begin making new financial commitments on the assumption that their loan has already been secured.
Some may use their credit cards for large purchases, take out personal loans to furnish their future home, or even finance a new car in preparation for their move.
These additional debts, though often unintentional, can significantly alter their credit profile and repayment capacity within just a few months.
When the bank rechecks their financial status just before the transfer, it often finds newly incurred debts, causing their debt service ratio to exceed the limit.
As a result, the mortgage application is rejected at the final hurdle, leaving prospective buyers unable to complete the transfer despite coming close to owning a home.
Q: WHY HAVE REJECTION RATES SOARED IN 2025?
The sharp uptick in mortgage rejections this year can be attributed to factors beyond prospective borrowers’ personal financial issues, said Surachet Kongcheep, head of research and consultancy at property consultancy Cushman and Wakefield Thailand.
While most people assume rejected mortgage applications are due to a prospective borrower’s poor credit record or excessive personal debt, banks today are digging deeper into applicants’ backgrounds and their finances, he said.
“Even if a homebuyer has no history of bad credit, has never defaulted on personal loans, or never financed high-value items, financial institutions are now assessing risks beyond the individual level,” said Mr Surachet.
A key change in lending practices is banks increasingly consider the financial health of an applicant’s employer or their business sector.
“Banks may look at whether the company or organisation the borrower works for is financially sound, or whether it belongs to a business sector under economic strain,” he said.
“If the employer operates in a high-risk or declining industry — often termed a sunset industry — that can negatively affect the borrower’s credit evaluation, even if their salary and debt record are solid.”
In some cases, the bank’s decision is influenced by the payment behaviour of other employees within the same organisation.
“If a financial institution finds employees in the same company have existing debts — whether that’s a mortgage or personal loan — or have fallen behind on repayments, it may regard the company as a higher-risk employer,” said Mr Surachet.
“As a result, even a new borrower from that organisation who personally has no financial issues could still be rejected.”
This broader, more cautious approach stems from banks’ determination to avoid a new wave of NPLs.
During property cycles in the past, institutions that approved loans too liberally later suffered heavy losses, especially when the value of collateralised assets sank.
“Although property assets are used as collateral, they rarely cover the full value of the loan once repossessed,” he said. “When banks are forced to sell non-performing assets in bulk, they almost always have to offer steep discounts, resulting in losses that outweigh the collateral value.”
Because of this, financial institutions are now enforcing stricter due diligence when scrutinising loan approvals, extending beyond the borrower’s credit history to include their employment stability, industry outlook, and even the repayment behaviour of their peers, said Mr Surachet.
“Banks simply do not want to take chances,” he said. “Their goal is to prevent bad debt before it happens.”