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Are you ready to pay? 30th September is not too far away.

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It has been announced by many banks that they are not keen on extending the moratorium after 30th September. If you think it’s unfair, well if they extend, it’s also unfair to many thousands or hundreds of thousand of people. You see, banks have shareholders who will have to accept even lower profits if the moratorium is extended any further. They had already accepted that first 6 months moratorium from April 2020 to end September 2020.

Worried employees?

The banks also have many employees who would also start to worry if the banks’ profits kept dropping and yet have to keep paying salaries. Who will help them if the banks decided to let them go? The ones who got the moratorium? I guess if someone owes us money and they kept asking for extension, even we would not like it that much, right? So, what happens if the one really needs the extra extension?

Article in themalaysianreserve.com Association of Islamic Banking and Financial Institutions Malaysia (AIBIM) ED Ratna Sha’erah Kamaludin said member lenders are looking at ways to help borrowers who need help with repayments if the moratorium ends in September. She said“For now, not all customers need or want relief. So, moving to a case by case basis helps banks to support more specifically. This is in the best interest of the economy as it has the better short-term and long-term outcome for both customers and banks.”

Meanwhile Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz said that the government has not decided on the loan moratorium. He says that the next steps would be to have continued discussions with local banks to provide more targeted aid. He said, “For example, this may mean extending the loan period to reduce the instalment amount or to change terms and conditions.” Please do refer to the full article here: Article in themalaysianreserve.com

Would the banks want to take back that property?

When we understand the market a little bit more, we would know that even if the banks were to take back the properties due to default, it is not certain that they could auction of that property at a price around market price or higher than market price! This is why it is not in the best interest to banks to make all defaulters a bankrupt and having to now take the property and auction it at easily 40 percent below market. When they sell at such a low price, all stakeholders lose money except the potential buyer.

My thoughts

If we are an owner, it’s best to be prepared to start paying when the day comes. This is not the time to spend too much and then worry later. If we are waiting for auction properties to buy which comes from all these defaulters, I think this may not the year. Probably we have slightly more next year but the number would be manageable. The banks prefer to help their current borrower so that very soon the mortgage payment could be regularised again. As for now, perhaps it’s best to go to the bank and actually ask what are the options available. Cheers.

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Next suggested article: When bank refuses to lend to you or lends you lower than what you asked for, what does that mean?

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