Borrowers’ financial standing and income levels were responsible for most failed loan applications, said local banks being targeted over new home buyers’ inability to secure financing.
In a joint statement, the Association of Banks in Malaysia (ABM) and Association of Islamic Banking Institutions Malaysia (AIBIM) said a survey found that failed applicants did not meet Bank Negara Malaysia’s guidelines on debt-to-income ratio, had bad credit history, and fell below income requirements, among others.
“Buying a home is a major financial purchase and a home financing facility forms the highest value item of a customer’s debt portfolio.
“Thus, it is crucial for banking institutions to establish that a customer has the financial capability to make repayments during the financing tenure,” it said.
Stressing that banks would continue to provide financial services to eligible applicants, they said five criteria ― character, capacity, collateral, condition and capital ― will continue to be used for evaluation purposes.
Earlier this month, Urban Wellbeing, Housing and Local Government Minister Tan Sri Noh Omar announced the introduction of an initiative that enables property developers to give out loans to buyers at an interest rate of 12 per cent with collateral and 18 per cent without collateral.
Noh said that the move is intended to assist Malaysians who are unable to get a full housing loan from banks or those who may only be given a partial housing loan.
However the proposal has been met with fierce opposition, including from his very own colleague Second Finance Minister Datuk Johari Abdul Ghani who deemed the proposal illogical and unsustainable.
Fitch Ratings also noted that the move might lead to the increase in the country’s debt due to unregulated lending from Bank Negara Malaysia.
Today, Noh was, however, reported as saying that the interest rate from property developers should be in the region of six per cent.
He said that it was the “fair rate” and that his previous announcement of 12 and 18 per cent was sensationalised.
He explained that the figures he previously mentioned were the maximum rates allowed by the Moneylenders Act.
The Malay Mail Online