Lending to everyone is not helping the borrower, actually.

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If we are buying a RM300,000 property and could not get our loans approved, should some financial institution approve it so that we could still buy that RM300,000 property? Well, there is a potential new bank which will be set up to lend to borrowers for homes worth below RM300,000. Okay, there are no further details. For example, would this be a last resort bank? After borrowers have failed to get a loan, then they could apply to this special bank? Would this be a competing bank to all other banks for these RM300,000 and below loans? If it is competing, will it be fair to all the other banks? How much funds would this new and special bank has? It could not be unlimited, right? Of course there are many other questions including the PTPTN example. If borrowers fail to pay, would discounts be given? When borrowers could not pay, then would it be listed in CCRIS? And thus affecting their future? Including leaving the country for a holiday? Here’s that article in housingwatch.my for reference. 

This is what National House Buyers Association of Malaysia (HBA) says with regards to this special bank. HBA says it is concerned because this may lead to more bankruptcy cases. HBA’s Chinese division head Tan Chong Leng said that banks would only approve loans after they have assessed each borrower’s debt level through CTOS and CCRIS. (He meant that the banks would be very careful in their approval process and I think this should be the case for all loans. There should not be any ‘friendly’ loan approval for example, if you know my meaning)  However, Tan said that when the banks no longer look at the household debt level, then this is not helping the borrower but will actually be a burden to them. If the buyers fail to pay the instalments, they may receive warnings from the banks and even see their houses being auctioned off and the buyer may be declared a bankrupt. Here’s that article in housingwatch.my for reference. 

I think my views have been expressed above but frankly speaking, this new bank is not the best solution to helping buyers get their first home. Perhaps instead of helping them to OVERSTRETCH themselves, how about educating them with more financial awareness? A very real example? Secondary properties should be considered first since it’s usually cheaper and the buyer could almost stay there within a few months of buying it. In fact, on a worst case scenario, the owner could even rent out a room or two so that the mortgage instalment is reduced. Assuming this bank is STILL going to be created, it must study the mistakes from the PTPTN route and ensure that it does not fail in its noble goal which is to help buyers who need a home get a home. Until today, the typical first-time home buyer does not even know that there are SO MANY choices and could only look at those few areas that they know. When this happens, demand is by far bigger than supply in that particular area and prices go up further. How about providing these buyers with more information instead? Actually, a lot of other solutions which does not necessarily be another huge financial burden to the nation. Happy investing yeah.

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written on 6 May 2018

Next suggested article: Financing options for first-time home buyers?

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