Source from: Property buyers to follow stricter loan rules
Bank Negara has set stricter rules on housing loans, restricting that loans must not be longer than 35 years in an effort to reduce household debt in the country.
Bank Negara has acted upon these rules as the country’s household-debt-to-Gross Domestic Product (GDP) ratio has reached 83 percent, the highest in emerging Asia.
The guidelines also saw central banks’ prohibition in offering approved personal financing products. These measures will also be extended to all financial institutions as well as credit cooperatives regulated by Bank Negara, Aeon Credit Service (M) Bhd, Malaysia Building Society Bhd, and the Malaysia Co-operative Societies Commission.
All these institutions need to implement lending limits such as giving new borrowers — particularly those with lower incomes — loans amounting to 60 percent of their monthly pay.
The new limits will not affect loan applications made prior to 5 July.
Bank Negara Governor Tan Sri Zeti Akhtar Aziz said the household debt is not yet alarming but would eventually be so based on present trends. She said that long property loan periods “encourage excessive debt accumulation by households and increases the vulnerability of this (the household) sector.”
For industry players, the property market would not be greatly affected by these new measures as “the older generation of Malaysians had already bought into the property cycle” and would mainly affect the younger generation.
“They are the ones who will need loans with the extra tenure, not the older generation who are mainly able to afford (higher monthly repayments),” said IOI Properties’ Director Teh Chin Guan.
“In the short term, the level of affordability for the younger generation will be lower at today’s prices,” he said.
Khong & Jaafar Managing Director Elvin Fernandez said the move by central bank deserves an applause as property loans with over 40 years tenure was not advisable.
Datuk Seri Michael K.C. Yam, President of Real Estate and Housing Developers’ Association, said the new rules were a “good pre-emptive move because Malaysians are not very disciplined when it comes to these matters”.
“In other countries the maximum tenure is usually 25 years or until the person reaches the retirement age of 55,” he said.
Hareez: It’s a good move by BNM to control household debts. However, just wonder how prosperous those “Along” business would be..
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