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Access to financing is not the primary issue for affordable housing

Ref No : 07/17/06 18 Jul 2017 Embargo : For immediate release    

This is with reference to media reports on calls to review housing loan criteria for potential buyers of affordable houses. The comments made by some parties 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.

Eligible home buyers will continue to have access to financing. In the first five months of 2017, RM40 billion 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 has also been stable at 74%. 

Banks have also introduced more flexible financing solutions to improve affordability, such as that offered for PRIMA homes. Outstanding housing loans has continued to outpace overall loan growth, increasing by 8.6% y-o-y to RM493 billion as at end-May 2017.  

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 is worth reminding that banking institutions’ core business is to provide financing.

Based on engagements with banking institutions, 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 is 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.

Solutions to affordable housing need to address the shortage of affordable houses and the high house prices relative to income. Based on National Property Information Centre’s data, 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. 

For a more complete discussion on the issue of access to housing loans, kindly refer to  Bank Negara Malaysia’s article entitled “Debunking the Myth: Property Measures Have Led to Higher Loan Rejection Rates” at the URL below:
http://www.bnm.gov.my/files/publication/qb/2017/Q1/p5_ba1.pdf

Bank Negara Malaysia
18 Jul 2017

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