Bank Negara should restore the property loan period for first time buyers to 45 years

DAP calls on Bank Negara to restore the property loan period for first time buyers to a maximum of 45 years which banks must offer, as well as focus on capping car loans to reduce household debt at 83% of GDP is the 2nd highest in Asia. Whilst Bank Negara may feel that imposition of more stringent guidelines on household loans, is necessary to bring down household debt, focus should be on car and not housing loans.

Bank Negara Governor Tan Sri Dr Zeti Akhtar Aziz had said that in comparison, Thailand’s household debt ratio stands at 30%, Indonesia at 15.8%, Hong Kong at 58%, Taiwan at 82%, Japan at 75% and Singapore at 67%. Only the United States at 91.7%, United Kingdom at 114%, Australia at 113%, New Zealand at 91%, and South Korea at 91% have higher household debt to GDP.

The three biggest contributors to Malaysian household debt are at April 2013 housing loans of RM 316.2 billion, cars of RM 145 billion, personal loans of RM55.8 billion and credit card of RM32.3 billion. In other words car loans comprise around 20% of Malaysia’s total household debt. Focus should be on reducing non-essential loans instead of basic housing needs.

Purchasing a house is of higher priority and necessity than a car. Restrictions on property loans, especially first time buyers, will deprive them a basic aspiration of having a roof over their heads that is owner-occupied. By focusing on imposing restrictions on car loans will hopefully help to reduce our household debt, car ownership and traffic congestion.

Under the new Bank Negara Malaysia rules to help reduce household debt in the country, property buyers can now take loans for up to 35 years instead of the previous 45 years, while personal loans could be paid back over a period of up to 10 years instead of the 25 years.

Whilst it is necessary to reduce Malaysia’s household-debt-to-Gross Domestic Product (GDP) ratio of 83%, restricting car loans than housing loans is more sustainable. Let us not deny the young from owning their own home where rising housing prices and the new restrictions in property loans purchases will combine to make owning their home an impossible dream.