Get rid of unfair loan terms


  • Letters
  • Friday, 08 Jun 2018

IT is heartening indeed to note that the new government would be looking at making approvals for bank loans easier for first-time house buyers especially in the critical affordable housing segment.

This is long overdue and undeniably one of the main reasons behind the spike in unsold affordable properties around the country both in the primary (new properties sold by developers) and the secondary market (sub sale or second-hand properties sold by existing owners).

For the past few years, it has been common knowledge that commercial banks had tightened their internal housing loan evaluation process and lending criteria, resulting in a sizeable “actual” loan rejection rate. The market perception was that banks were citing all kinds of flimsy excuses to reject loan applications especially in the “unattractive” low- and medium-cost property segments.

However, for some inexplicable reasons, this was even downplayed by the authorities including Bank Negara and the financial institutions themselves (through the Association of Banks Malaysia) who appeared to rely too much on official statistics rather than taking the cue from the real situation and feedback from the ground.

It is hoped that the new government will rein in the commercial banks and compel them to play a more holistic role in the rebuilding of our nation after years of neglecting the long-suffering B40 segment (and to some extent the M40 group as well).

Traditionally, most banks also charge a higher interest rate for housing loans below RM100,000, thus burdening the B40 group even more. Ironically, for financing of luxury properties above RM500,000, banks would generally charge a much lower interest pricing as a promotional bait to attract the wealthier house buyers.

In other words, indirectly, the banks are using the higher profit spread from the B40 segment to “subsidise” the attractive lower pricing for the rich and super-rich segments!

If this isn’t cruel and inhumane, what is? Surely the Government must redress this anomaly and instruct the banks to put a stop to it.

Indeed, for first-time house buyers buying affordable properties (both in the primary and secondary markets), it will only be fair if the banks are required to charge a lower fixed rate pricing. This is so that any significant fluctuation in the base lending rate (BLR) would not burden the borrowers as the banks would normally increase the instalment amount when that happens.

Another questionable area in the banks’ loan evaluation process is the manner in which they compute the applicant’s income. In the past few years, it is believed that most banks wantonly excluded income derived from part-time jobs or businesses even though it is common knowledge that large numbers of our working population actually rely on a side income.

The mushrooming of nasi lemak and other food stalls and, of course, the popularity of e-commerce businesses and ride-hailing services such as Grab offer clear evidence to this reality. Therefore, banks really need to shake off their old mindset and embrace this new reality.

Our country is now undergoing a massive revamping and rebooting process in a determined effort to get rid of unfair practices and regressive laws in order to create a fair, just and equitable nation which benefits every level of society without neglecting anyone.

Likewise, the banks should also review their roles within the context of the new Malaysia. It’s high time they climbed down from their lofty position to revisit their original role as bankers and humbly “get down to the basics” in the area of nation-building.

Practically all the banks have been reporting annual profit in billions of ringgit these past few years. Shouldn’t they now contribute a small part of that huge profit back to the rakyat to lighten the burden of those in the lower and middle income groups?

J.K. JOSEPH

Melaka

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