ABM: Rejection rate for housing loans on the decline

PETALING JAYA: The rejection rate for housing loans have been on a declining trend from 25% in 2012 to 18% in 2014, contrary to perception that there are less housing loans approved, said the Association of Banks in Malaysia (ABM).
The association said this trend shows that borrowers and lenders are adjusting better to the affordability assessments and it is not true that there are tougher credit checks on potential buyers.
"Our member banks, which have focus in the retail sector, have been participating in the government's schemes such as 'PR1MA' and 'Skim Rumah Pertamaku'. Member banks are continually reviewing their strategies and engaging with the authorities to boost home ownership in the country while reigning in household debt," ABM executive director Chuah Mei Lin said in a statement yesterday.
"The business of commercial banks is in the main lending or extending credit while adhering to their respective risk appetites and/or the guidelines set by the regulators. Consumers who are eligible will continue to be able to obtain financing. What is important is for all consumers to recognise the need to make sound decisions of their own affordability appropriate to their financial circumstances," she added.
Recently the Johor state government called for Bank Negara Malaysia (BNM) to relax its regulations on banks in approving loans for eligible house buyers, especially first-time home buyers.
Johor state secretary Datuk Ismail Karim was reported as saying that first-time home buyers had their loans rejected by banks despite qualifying financially for affordable homes.
BNM reiterated that it does not impose any lending limits under its guidelines on responsible financing.
It said that its guidelines emphasises affordability assessments (based on the debt service ratio), which aims to ensure that borrowers will be able to repay any debt that they take out.
BNM also said that the guidelines do not prescribe a debt service ratio but banks should be able to demonstrate that borrowers have adequate buffers to manage unexpected expenditures, a rise in borrowing costs or income shocks, without falling into financial hardship due to excessive debt burdens.
ABM said its member banks offer various housing loan packages to suit the needs of consumers and encouraged consumers to shop around to find a financing package that best suits their needs.
It also encouraged consumers to fully and accurately disclose all material information with regard to their financial position when applying for a home loan.