PETALING JAYA: With the overall rate of housing loan rejections being reduced from about 30% in 2014 to about 20% in 2015, there is no reason to ease lending conditions, according to Bank Negara sources.
The source said housing loans are, in fact, “robust and growing at double digits”.
“The rejection rate is not benchmarked against our ‘restrictions’. What the banks have today is a broad set of guidelines.
“When developers call for loosening restrictions, what sort of restrictions are they referring to?”
Borrowers need to have a downpayment of 30% from the third house purchase onwards. The maximum loan tenure is currently 35 years. Increasing the loan tenure would result in retirees with debts, which Bank Negara does not want, the source said.
According to the source, easier mortgage financing that property developers are currently calling for essentially means “improving their own balance sheet but transferring their burden to the households”.
According to an income/affordability computation, a borrower with a mean monthly income of about RM6,000 can only afford a house of about RM350,000 and those earning about RM2,500, a RM50,000 house.
Even with this “simplified and imprudent” computation, which does not take into account existing liabilities like cars and study loan repayments, the inflation rate, the cost of living or savings, the maximum price is about RM350,000 for a monthly mean income of RM6,000.
“So, just easing lending conditions is not going to solve this complex issue,” the source said.
There is a difference between a house purchase and home ownership. A borrower may be able to pay his mortgage for a few years, only to default later and be caught in a foreclosure situation.
“A house purchase is concluded but it did not result in home ownership,” the source said, adding that what the central bank wants is quality loans and for bank employees to be remunerated based on this.
As for calls for the developers interest-bearing scheme (DIBS) to be re-introduced for first-time buyers, the source said property sold under such schemes tend to hike up prices by between 20% and 30%.
“Selling property with DIBS is a gimmick. At the end of the day, it means buyers are saddled with high instalments,” sources said.
The source said the central bank is well aware that the property sector had slowed down considerably last year, but helping developers to improve their balance sheet at the expense of households will result in rising household debts.
Higher house prices mean higher household debts. As it is, the source said that about three quarters of those who participated in a national survey said they would not be able to raise RM1,000 in an emergency. Home ownership may not be for some, the source said.