KUALA LUMPUR: The annual growth of total household borrowings moderated further to 4.9% in 2017 to RM1.139 trillion from 5.4% in 2016 and 14.2% in 2010.
According to Bank Negara Malaysia’s Financial Stability and Payment Systems Report 2017, the banking system loans also grew at a slower pace of 5.1% (2016: 5.3%).
The moderation was due mainly to lower borrowings for personal use, and the purchase of motor vehicles and non-residential property.
“This reflects greater awareness on the importance of debt affordability and financial management, and more prudent borrowing among households,” it said.
As for housing loans, expansion remained firm (8.5%; 2016: 9.1%), as eligible borrowers continued to have access to bank financing.
“The bulk of household debt continued to be acquired for wealth accumulation purposes.
“Almost two-thirds of household debt was secured by properties and principal-guaranteed investments, thereby substantially reducing net exposures on household debt,” it said.
As a share of GDP, total household debt declined further, although it remained high at 84.3% (2016: 88.3%).
Excluding non-bank financial institutions (NBFIs), total banking system loans extended to households declined to 69.3% of GDP (2016: 72.7%).
Bank Negara said due to continued income growth amid improved labour market conditions, total banking system loans extended to households are projected to be within the range of 65% to 70% of GDP in 2018.
On aggregate, the debt servicing capacity of households generally remained intact.
The ratio of total household assets-to-debt remained high at about four times (2016: 3.8 times).
In 2017, growth of 8.6% (2016: 5.3%) in household financial assets outpaced that of debt for the first time since 2012.
In value terms, the increase in household financial assets (RM191.2bil) more than tripled the increase in household debt (RM53.7bil).
This was supported by growth in deposits and unit trust funds which formed about half of household financial assets.
The availability of liquid financial assets continues to provide households the flexibility to adjust to unexpected changes in income or cost of living, particularly in the urban centres.
Excluding contributions to the Employees Provident Fund (EPF), the aggregate ratio of household liquid financial assets-to-debt stood at 1.5 times.
However, some borrowers earning less than RM5,000 per month are more susceptible to shocks.
Financial institutions’ exposures to vulnerable borrowers (those with monthly earnings below RM3,000) accounted for 19.9% of total household debt (2016: 21.9%; 2013: 28.4%) or 17.4% (2016: 19.1%; 2013: 25.1%) of total banking system financing to the household sector.
Half of this group’s borrowings were in the form of fixed-rate financing (hire purchase and personal financing) which reduces their sensitivity to changes in the cost of borrowing.
Borrowers in this group’s aggregate leverage (measured as a ratio of outstanding debt to annual income) of 8.3 times (2016: 8.1 times), with close to 40% of the borrowings taken by this group for house purchases.
“Measures taken by the government to improve access to affordable housing are therefore important to contain further debt accumulation within prudent levels,” it said.