According to the Association of Banks in Malaysia (ABM), the rejection rate for housing loans has declined to 18% in 2014. In 2012, it was 25%. No mention about 2013. This meant that the perception or understanding that more loans applications were being rejected is no longer true. The reason? Well, borrowers and lenders are now adjusting better to the affordability assessment. In other words, buyers start to buy lower to follow what they can afford and sellers are also lowering what they want as the selling price.
The report does not say whether it was also because developers have lowered their selling prices or perhaps adjusted the composition of their products to more affordable ones and thus their buyers were able to afford them better. Not too long ago, REHDA asked Bank Negara Malaysia (BNM) to relax its regulations on banks so that they can approve loans for eligible first-time home buyers. Read here: The cause of property prices up is Bank Negara. According to BNM, all banks must ensure the borrowers have adequate buffers to manage any unexpected expenditures. This is so that they do not fall into financial hardships due to excessive debt burdens.
Personally, I do not see this as a bad sign. I also do not see this as lowering of lending standards. This is because thus far I have not come across any banks which lends to everyone indiscriminately. The lower rejection rate simply meant that the market has adjusted itself and the potential bubble building up has passed. There are advanced nations for which the banks have exposed themselves way too much to home loans. I think their central banks MUST ensure this is curtailed because if another crisis arises, even if from these advanced nations, it would affect the world. Buy responsibly and borrow based on own affordability.
written on 1 June 2015
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