In a statement, ABM revealed that 11 Islamic financial institutions and 11 commercial banks in Malaysia are participating in the SRP scheme, in which 100 percent financing is offered for homes capped at RM500,000.
Applicants to the scheme must have a combined gross income of RM5,000 and must meet other conditions.
“Homebuyers are reminded that there are various financing options for them,” said the statement. “Commercial banks have been offering housing loans to applicants who are eligible.”
Although ABM encourages first time home buyers to consider government schemes, the association also underscored the perils of securing more credit and discourages home buyers from financially over-stretching themselves.
It advised first time buyers to shop around since each financial institution offers a different package. As such, buyers should get loan estimates first from multiple lenders prior to making a decision to buy.
“The borrower may also want to consider getting pre-approved for a housing loan before looking at purchasing a property.”
Notably, monthly home loan instalments and other long term monetary commitments, like hire purchase loans, should not be more than 40 percent of the buyer’s gross monthly income, said ABM.
First time home loan applicants should work with their financiers when making the affordability and sustainability assessments.
The association has 27 members, comprising commercial banks currently operating in Malaysia with the main objective of promoting and establishing a sound banking system in consultation and cooperation with the regulators.
The ABM statement follows Penang Chinese Chamber of Commerce calls for banks to ease lending rules.
Over the past couple of months, banks have been faced with the pressure to relax lending rules in order to boost the property sector, which has been particularly buoyant from 2009 to 2014. However, this period also witnessed tremendous speculation.
In April, a source said that there is a difference between home ownership and house purchase.
“A borrower may be able to buy a house, but this need not result in house ownership,” stated the source.
“There is no point doing a cursory credit assessment and a borrower services loan for only three to four years only to have it auctioned off later. Our objective is to make sure only those who can afford loan can get a loan.”
The source noted that while the bank is protected since it could auction the property, the borrower is left with a debt he could not afford to pay.
As at end-March this year, Malaysia saw household debt over GDP (gross domestic product) drop to 89 percent from 89.1 percent at end-2015, said Deputy Finance Minister Datuk Chua Tee Yong in May.
He revealed that 62.6 percent of the total household debt as at March 2016 was intended for assets collection, which includes investment in financial assets and property acquisition.
Second Finance Minister Datuk Johari Abdul Ghani in July said the country’s household debt is among the highest in the world.
“Ultimately, the people will suffer because if we look at our household debt, we are among the highest in the world.”
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