ADVISORY: Mortgage financing adapts to new era

0 comments

ADAPTABLE: More innovative products are being offerred by banks which are still keen to lend despite tightening of lending policieser

With the recent Budget 2013 announcement by our Prime Minister, do you agree with me that there will not be much impact on the property industry? The Real Property Gains Tax (RPGT) only increased from 10 per cent to 15 per cent for the first three years and thereafter to the fifth year from five per cent to 10 per cent.

What attracted me is the “relaxed lending policy” for the First Home purchasers. Previously, the approval rates for this type of loans are very low. At least from now on, more people will be able to own their first home.
The following are the relevant changes presented during the Budget announcement. (See Table 1)
 
Borrowing from the banks today has gone through tremendous changes as compared to the early 80s or 90s. Before the introduction of Central Credit Reference System (CCRIS), approval was fairly easy. You can have multiple loans with many banks. I remember during those times even with salary vouchers of the latest three months and with no other supporting documents, loans can still be approved easily.
 
Well, like it or not, we are all in the new millennium and would have to adjust to the new changes set by Bank Negara. We can see that the new lending policies introduced by Bank Negara are taking effect ever since the Banks started imposing the prescribed lending restrictions such as the 70 per cent margin of finance from the third property onwards, 60 per cent margin on company borrowings and approval based on net income instead of gross income.
 
No doubt it is getting more and more difficult to borrow from the banks but don’t worry, where profit is the bottomline of any bank, these banks will still have to lend. The difference now is that banks prefer to lend to good credit rated customers.
 
Banks until today are still very keen to lend. You can see that competition among the banks on their loan packages is still hot. Competition is good for the industry as consumers will benefit the most from better loan packages and interest rates. During my Mortgage Forecast talk recently, I mentioned that I expect more innovative products and services related to consumer lending to be introduced in Malaysia.
 
Recently when I did some research on the Internet, I found that there is a section in a foreign bank website which helps loan borrowers to find out the market value of the property that they intended to purchase. This makes loans financing much easier. I think most property purchasers in Malaysia are facing the same dilemma, which is determining whether the property they are buying is at fair value.
 
Innovative packages: If you look to the West, there are many types of innovative loan packages offered by the Banks. One that caught my eye is a loan package called “Reverse Mortgage” which is offered to senior citizens above 60 years old. The loan borrowers need not pay their installments until they pass away.
 
Upon their death, the Bank will sell off the property and after deducting their costs and interest, the balance will be distributed to the beneficiaries. I think it is a matter of time before this type of loan reaches Malaysian shores.
 
Islamic Lending will also become another powerhouse in the Banks’ lending arena. You can see that today, Islamic banking is getting a lot of attention by the Government. More and more people are also taking up Islamic loans nowadays. Islamic Loan packages have evolved and have gone through a lot of improvements compared with 10 years ago. Gone are the days when Islamic Interest rates are fixed in nature.
 
Today, Banks are also offering floating interest rate which is tagged to Bank Financing Rate (BFR) which is similar to Base Lending Rate (BLR). One key feature in Islamic loan packages that attracts loan borrowers especially property investors is the “no penalty and no lock-in period”. Normally, in conventional loans, there will be a lock-in period ranging from one year to five years with a penalty of between one per cent to five per cent.
 
Banks nowadays have also switched their focus to Personal Lending without encumbrances. Personal Lending is also easier to apply for as compared to property loans. The danger is that it will affect your credit rating tremendously form and the loan is already pre-approved. This has contributed to high household debts and will affect property Loan approval.
 
These banks are so aggressive that up until recently, I get calls almost every week but from different sales personnel from the same bank. I am also worried that our personal information is being passed from one person to another. I even came across former bank sales people selling customers’ contact information for a fee after they had resigned.
 
Recently, I wrote to a bank to stop them from calling me to sell their products and also to stop circulating my personal information among their sales people.
 
In the year 2013, it is not going to get much easier when it comes to property financing. There might be more tightening in lending policies which are introduced to cool down the property market.
 
Having said that, banks are still keen to lend. For property players, start improving your credit rating and the banks will still lend to you.
 
If you like to attend my latest seminars, visit www.myseminars4u.com or write to me at enquiry@golden-millennium.com.when you apply for a property loan.
 
I think most of you have received calls from Banks promoting Cash on Call Personal Loan which is tagged to your credit card limit. It is so easy to apply. You don’t even need to sign any application form and the loan is already pre-approved. This has contributed to high household debts and will affect property Loan approval.
 
These banks are so aggressive that up until recently, I get calls almost every week but from different sales personnel from the same bank. I am also worried that our personal information is being passed from one person to another. I even came across former bank sales people selling customers’ contact information for a fee after they had resigned.
 
Recently, I wrote to a bank to stop them from calling me to sell their products and also to stop circulating my personal information among their sales people.
 
In the year 2013, it is not going to get much easier when it comes to property financing. There might be more tightening in lending policies which are introduced to cool down the property market.
 
Having said that, banks are still keen to lend. For property players, start improving your credit rating and the banks will still lend to you.
 
If you like to attend my latest seminars, visit www.myseminars4u.com or write to me at enquiry@golden-millennium.com.

 

 


Related Articles

Leave Your Comment


Leave Your Comment:

New Straits Times reserves the right not to publish offensive or abusive comments and those of hate speech, harassment, commercial promos and invasion of privacy. Your IP will be logged and may be used to prevent further submission.The views expressed here are that of the members of the public and unless specifically stated are not those of NST.