Bank Negara Malaysia Tightens House Loans 2013

Posted by Kris | Sunday, July 07, 2013 | | 14 comments »

property loan
We all need loans 
I don't really think this latest move by Bank Negara will dampened the investor's appetite for flipping properties in Malaysia. They should have tightened more on the loan eligibility requirements. This is not going to tighten the money flowing to investors.

Since this new was announced on Friday after the stock market close, i really wonder whether this will give people reason to sell down coming Monday. Ironically, i saw the following comments from BNM's website. Scared of market  jitters?

Embargo : Not for publication or broadcast before 17 00 hours on Friday 05 July 2013

See below announcements.

Measures to Further Promote a Sound and Sustainable Household Sector

Bank Negara Malaysia announces today, the implementation of a set of measures aimed at avoiding excessive household indebtedness and to reinforce responsible lending practices by key credit providers. These measures, which take effect immediately, complements the earlier measures introduced since 2010 to promote a sound and sustainable household sector.
The measures are:
  1. Maximum tenure of 10 years for financing extended for personal use;
  2. Maximum tenure of 35 years for financing granted for the purchase of residential and non-residential properties;
  3. Prohibition on the offering of pre-approved personal financing products.
The limits on financing tenure will not affect applications made before today.
Household debts have continued to increase at a strong pace, averaging at an annual rate of 12% over the recent five years. While this has been supported by positive income and employment conditions, in the more recent period, there has been a growing trend in the offering of financial products that are not in the long-term interest of consumers. This includes extended financing tenures of up to 45 years for house financing and 25 years for personal financing. While this may reduce the monthly repayments, in the long run, this increases the overall debt burden of households. Such practices encourage excessive debt accumulation by households and increase the vulnerability of this sector.
These measures are issued pursuant to section 31(1)(a) of the Central Bank of Malaysia Act 2009 and apply to all financial institutions regulated by Bank Negara Malaysia, credit cooperatives regulated by the Suruhanjaya Koperasi Malaysia, Malaysia Building Society Berhad and AEON Credit Service (M) Berhad. This is to ensure consistency in the financing practices across all the key credit providers.
In addition to the above measures, the key credit providers are required to observe prudent debt service ratios in their credit assessment to ensure households have sufficient financial buffers to protect them against rising costs and unexpected adverse events. Households who have the financial capacity to take on borrowings will continue to enjoy access to financing. To enhance responsible debt management by households, Bank Negara Malaysia will intensify its efforts in financial education to all segments of society including young and first time borrowers from financial institutions. In addition, the framework for consumer protection will continue to be further strengthened under the Financial Services Act and Islamic Financial Services Act.
 
Bank Negara Malaysia
05 July 2013


14 comments

  1. ChampDog // 3:52 PM  

    Would you wish more tighten or less? :)

  2. Kris // 3:54 PM  

    Honestly, I does not matter to me which direction BNM goes :D

  3. ChampDog // 3:56 PM  

    Hahaha, cool one. That's the right way to go! :)

  4. Savahn // 4:25 PM  

    It will not stop investors who flip directly and you are right to suggest tightening at the loan eligibility end - which BNM has already done with 3rd property loan-to-value cap of 70%. That curbs the supply side of the secondary housing market

    This new set of measures will curb the demand side of the secondary market. With less credit available or with the credit cap at a lower level, demand will be dampened.

    Additionally, the personal loan financing curbs will also affect "flippers" who tend to finance their investments through personal loans. That said, rich flippers and those who already have solid investments can always refinance to do more flipping. Not a big deal.

  5. kampunginvestor // 10:29 AM  

    Or BNM smells blood soon? ^^

  6. Kris // 10:41 PM  

    They worry about the "Shadow" banks those non-financial institution that gives out loan but not really fall into financial banking regulations. However that changed with the FSA act recently.

    I smell blood, as banks aggressively calling me up like every week offering me personal loans!!

  7. maveric // 3:07 PM  

    @ Kris,

    Why are the banks aggressively calling you up weekly to offer you personal loans??

    They must be flushed with money..!!

    EPF annual report to parliament reported that RM12,190,000,000/- withdrawn under 'Age 55' retirement scheme.

    Dig a bit of information for curiosity sake...this RM12.19 Billion represents 7.9% of EPF total asset base of RM154 Billion in 2011.

    Dig more information for curiosity sake...as at end of 2011,total savings in the 51-55 years age group was RM33 Billion.This RM12.19 Billion represents 36% of the total RM33 Billion.

    The numbers kind of tally up and the 36% kind of concluded that almost all 'Age 55' entitled retirees withdrew their monies...!?

    This is probably 1 reason as to the high liquidity in the bank...

    Not so good for me as the interest rate remains low...:(


  8. Kris // 6:59 PM  

    @Maveric,

    No idea why they always call me up. Probably banks are very aggressive so that they can meet their KPI and ensure they grow profit year by year.

  9. maveric // 4:43 PM  

    @ Kris

    An interesting article in M'sianC titled ' Is the M'sian market overvalued ? How deep will the KLSE plunge in the coming crash...? '

    It explained a valuation metric known as market Capitalization to GDP(%).It concluded that KLSE was as at 2012(data available from World Bank) was trading at 56% over its GDP and at such was the 4th most expensive market in the world..!!

    It concluded by saying that we have been fooled into a false sense of security by the main stream media and Bank Negara through their 'reassurance babble' assuring us that everything is fine and within fair valuation,deficits don't matter,inflation within expectations,real estate is not in a bubble,our debts are manageable...and so on...'

    He envisioned that for the the mid-term of about 2 months,there is a good chance that the KLSE index is coming down to 1,620 points.

    Does he sound ' loony ' to you..??


  10. Kris // 4:50 PM  

    @Maveric,

    Long time no hear from you :D

    Which site is MalaysianC??

    Yeah,we been fooled into a sense of security. There is NO way that everything will always go UP UP. And everyone is shouting buy buy buy with a premium on the hopes of a rosy economic future.

    Inflation is very high nowadays as our country debt is ballooning. As you can see Malaysia has yet to enter a technical recession unlike Thailand and recently recovered Singapore.

    And I don't think Malaysian economy is as strong and resilient as Singapore.

  11. maveric // 5:53 PM  

    @ Kris

    M'sianC is actually Malaysia Chronicle.Do read this interesting article.Come to think about it...all wise people advocate a 'contrarian' approach in share purchase..that is buy in when the herd is fleeing..??

    As you are probably aware,I am not a share market dabbler per se..on the contrary,I am a retiree trying to live a life of leisure..but like all emotional natural humans,news like this do rekindle a little bit of greed in me...!!

    As the plan goes,I shall give it a month time until end September to see if the index goes down as predicted...then I shall withdraw some EPF $ & go in say @ 1,600 points level..!


    What say you..?? :D

  12. Kris // 8:39 PM  

    @Maveric,

    I am holding like 70% of my stock portfolio in cash. The 30% is more like a punt for me for now. Will liquidate as soon it hits my target. I bought quite a laggard stock which I think is under-valued.

    As for property investments, I will stop at it as I think it is not so lucrative any-more and too high oversupply. I noticed that there is a lot of sellers trying to offload even though the building have yet to start building!!

    I guess making money is indeed 'fun' provided you win of course. lol.

    Just wait and enjoy the ride.

  13. maveric // 7:14 PM  

    @Kris

    The 'stars & moons' seem to be lining up nicely for yours ...oops..! rather for our $ well being as predicted...

    KLSE 'runtuh ' 21.2 points today to 1,701 points..!

    Come to think of it..how can one be euphoria and free of guilt benefiting from others miseries..??

    Yupe...I am waiting but very doubtful as to the joy in the ride.

  14. Kris // 9:39 PM  

    @maveric,

    Don't be so bad lar. :D