Housing loans should continue on an expansionary trend this year, albeit at a slower pace owing to economic and geopolitical uncertainties.
Home loans are sluggish at the moment, but should improve, said an official from Bumiputra Commerce Bank (BCB). I foresee a pick-up in home loans in March when we can gauge better, he said, pointing out that the slower pace in January and February was due to both months being short festive months.
SJ Research analyst K.H. Wee thinks that home loans growth has stabilised. He is projecting housing loans to comprise 22% of total loans this year, from about 20% currently. A year ago, it was close to 18%.
Those who wanted to buy a house would have bought one already. Furthermore, there aren't likely to be too many property launches now, he added.
The BCB official agrees that developers would be cautious in launching new housing projects, and when they do, it would be in main towns and cities popular with the public.
Home loans comprise 12% to 14% of BCB's total loans. Its rural branches make up about 40% of its total branches and mortgage financing is more skewed towards lower cost houses, while its branches in the urban areas lend to buyers of houses costing RM150,000 and above.
Refinancing and sub-sales are likely to drive home loans a reason why banks such as BCB are contemplating the launch of products with a fixed rate of say, five to seven years, targeting borrowers in that segment specifically.
Yuppies would adopt a wait and see attitude this year and go more for rental. However, those who are more stable, in the 35 to 45 age group, are likely to continue to upgrade from their present premises, said the BCB official.
Banks continue to focus on mortgage financing as it carries lower risks compared to other types of financing. Competitive financing in a low interest rate regime has also been a driver of growth in this respect, and many refinance their loans to enjoy lower rates.
According to SJ's Wee, this was one of the reasons why property prices on the whole are holding steady.
In order to meet customers' demands, banks are beginning to move from two-tier to three-tier lending schemes. (In a three-tier scheme for example, a bank could set a fixed rate of 2% to 2.5% for the first year of the loan, base lending rate (BLR) of 6.4% in the second year, and thereafter, a fixed rate of BLR plus 0.6%.)
The lower risks and stable returns from residential property loans have also resulted in other players muscling in.
Wee noted that insurance company, AIA, has jumped into home mortgage financing, successfully attracting borrowers with its fixed rate of 6.38% for 30 years.
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