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Bank Negara: Housing loan criteria review won’t resolve affordable housing issue


Bank Negara says banks have introduced more flexible financing solutions to improve affordability, such as that offered for PRIMA homes. - Bernama pic

Bank Negara says banks have introduced more flexible financing solutions to improve affordability, such as that offered for PRIMA homes. - Bernama pic

KUALA LUMPUR: Access to financing is not the main issue in affordable housing, said Bank Negara Malaysia.

The central bank, referring to media reports on calls to review housing loan criteria for potential buyers of affordable houses, said in a statement that the comments had caused confusion and were not based on facts and accurate information. 

“If the issue of affordable housing is to be resolved, all parties must be clear on the root cause of the matter and honestly strive to help those affected by it,” it said.

Based on engagements with banking institutions, it found that housing loans rejected by banking institutions mostly involved borrowers with high levels of pre-existing debt obligations that would expose them to severe financial risk if further debt were extended. 

“For such borrowers, the risk of foreclosure is significantly higher and they are much more likely to fall in financial hardship in the event of income shocks or large medical expenses,” it said.

According to Bank Negara, eligible home buyers will continue to have access to financing. 

In the first five months of 2017, RM40bil of housing loans were approved to more than 152,000 borrowers. Three quarters of these borrowers were first-time house buyers.

The approval rate for housing loans had also been stable at 74%, it said.  

Banks, it continued, had also introduced more flexible financing solutions to improve affordability, such as that offered for PRIMA homes.

Outstanding housing loans had continued to outpace overall loan growth, increasing by 8.6% year-on-year to RM493bil as at end-May 2017, the bank pointed out.   

“The responsible financing guidelines are in place to protect the interests of borrowers by ensuring that those who borrow are within their capacity to honour their financial obligation. Financial institutions will offer financing to all eligible borrowers and only reject loan applicants who are clearly over-extended in terms of the ability to take on more debt and have adverse credit repayment histories,” it said.

Bank Negara said solutions to affordable housing must address the shortage of affordable houses and the high house prices relative to income.

Citing National Property Information Centre’s data, it said less than 30% of new housing launches in 2015-2016 were for houses priced less than RM250,000, compared to 70% during the 2008-2009 period. 

“Housing affordability has not improved significantly where average national house prices remained at 4.4 times of median income (affordable range is 3.0 and below), with lower affordability recorded for some major states and urban cities. Housing developers, working together with authorities and relevant stakeholders, should therefore intensify efforts to reduce costs and accelerate supply,” it said.  
   
Bank Negara said for a more complete discussion on the issue of access to housing loans, one could refer to an article in its quarterly bulletin entitled Debunking the Myth: Property Measures Have Led to Higher Loan Rejection Rates.

The article is available at this url: 
http://www.bnm.gov.my/files/publication/qb/2017/Q1/p5_ba1.pdf  
 

Banking , Property , Bank Negara Malaysia

   

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