Bank Negara announced that the Overnight Policy Rate (OPR) would be increased by 25bps, translating to an increase of the BLR from 6.6% to 6.85%.
I don't think Bank Negara have any choice but to raise interest rates, especially to curb inflation, at 3.4% forecasted for this year as well as to control excessive speculation. Gradual increases would stabilise the markets and protect the wealth of the people.
Currently, the FD rate among the local banks hover between 3.1% and 3.2%. Savings rates are a dismal 0% to 2.5% depending on the amount of deposits. Anything below 100k will likely give you up to a maximum of 2% at today's rates. In short, keeping money in the bank earns you pittance.
OK. Back to housing loans.
Looks like DAP is pretty quick to object.
New rate hike could bury hopes of would-be homebuyers, says DAP
The central bank’s move to increase interest rates will further burden prospective buyers already struggling to finance their first homes unless measures are introduced to cushion its effects, DAP secretary-general Lim Guan Eng said today.
Lim suggested that Putrajaya reintroduce the Developer Interest-Bearing Scheme (DIBS) for affordable houses as a measure to help first-time buyers to purchase the homes.
common grouse from first-time buyers was the difficulty in securing financing for their intended homes
over two in three loan applicants for affordable housing costing below RM400,000 were rejected
You can’t give the same conditions and interest rates to a buyer of a RM1 million house as someone buying a RM40,000 house says Jagdeep Singh Deo
I think DAP is missing the point in their criticism regarding the rise of interest rates. I also find that they are not being honest in their excuses. Blaming a .25% increase in BLR to the problem of unaffordable housing is a poor excuse.
Is DAP speaking up for the buyers or the developers? The root of the problem is the price!
1. RM400k - Whoever came up with the figure of RM400k as affordable housing clearly does not belong to the group that needs affordable housing. Who came up with this figure anyway? I'll hazard a guess that it would most like be the developers! RM400k IS NOT affordable to the lower income! RM40k is affordable. 100k-200k is still affordable. The simple reason why so many from this group could not get their loan applications approved is because they can't afford it!
2. The way I see it, state governments are not doing their part. Instead of earning revenue by selling state lands at a premium to developers who then build expensive luxury properties, the state should instead allocate some land specifically for affordable housing. Are you telling me that the developers can only build them at RM400k per unit?
3. Developer Interest-Bearing Scheme (DIBS). DIBS is the main contributing factor that led to speculation. Those who could not afford RM400k houses should buy cheaper ones. If they can't even service the interest during construction, how are they going to pay the installments when their houses are ready? Moreover, developers would have marked up the selling price of the property to include the interest charges. If they abandon their projects, the buyers still need to repay the loan plus the interests.
Providing housing for the people is one of the responsibilities of governments.
4. What happens to the low income then? Banks won't lend to them because they actually could not afford a RM400k property? Some would be able to afford 100k houses, even 200K. I don't think those with a household income of less than RM6k should take up a 400k loan. Those with kids and compounded by the rising cost of living, rising interest rates, GST, removal of subsidies for fuel, etc... will face problems servicing their loans.
The low income group needs public housing, which happens to fall under the purview of state governments. I'm not seeing any of these being built.
Instead of DIBS, perhaps the developers & state government should build first, then sell, so that buyers only start servicing their loans when the houses are delivered. All the buyer has to do is come up with a 10% deposit, and their loans are only activated upon delivery. Now, that will be a "people-friendly" policy!
The Federal Government should do their part as well by drawing up better laws to protect the buyers, especially in cases of abandon projects, material quality and specifications.
And lastly... RM400k is NOT AFFORDABLE housing!
Only those who belong to the HIGH INCOME group would think RM400k is affordable!
New rate hike could bury hopes of would-be homebuyers, says DAP
GEORGE TOWN, July 11 — The central bank’s move to increase interest rates will further burden prospective buyers already struggling to finance their first homes unless measures are introduced to cushion its effects, DAP secretary-general Lim Guan Eng said today.
Opposing the interest rate hike announced yesterday, Lim suggested that Putrajaya reintroduce the Developer Interest-Bearing Scheme (DIBS) for affordable houses as a measure to help first-time buyers to purchase the homes.
“Reinstating the DIBS for houses below RM400,000 would benefit first-time buyers and promote housing democracy,” he said in a statement issued today.
DIBS is a form of interest capitalisation Scheme (ICS) where interest costs are capitalised or built into the sale price, instead of being paid by the borrower as they are incurred.
The government prohibited DIBS at end of last year to curb speculation on properties.
The Penang chief minister said the reintroduction of DIBS would alleviate the pressure on homebuyers arising from the rate increase.
“This allows buyers to purchase their houses by paying 10 per cent and giving them breathing room by not paying interest payments and rent at the same time whilst waiting for their houses to be completed,” he said.
Saying that a common grouse from first-time buyers was the difficulty in securing financing for their intended homes, Lim asserted that Bank Negara Malaysia’s move yesterday would further exacerbate the problem.
Yesterday, Bank Negara raised the overnight policy rate (OPR) by 25 basis points to 3.25 per cent, the first such increase in three years.
The OPR determines interbank loans and affects other interest rates such as the base lending rate (BLR) and other interests on consumer banking services including home mortgages.
State executive councillor for housing development Jagdeep Singh Deo also expressed concern on the difficulty for new homebuyers in getting loans for affordable houses, saying this nullified efforts to build more units to alleviate spiralling home prices in the state.
“I appeal to the government, Bank Negara and the banks to come up with a programme or scheme just for first-time buyers of affordable housing because it is pointless for the state to be building affordable homes when they can’t get loans to buy the homes,” Jagdeep said at a press conference at his office today.
He said over two in three loan applicants for affordable housing costing below RM400,000 were rejected.
“This means, out of 10 applicants, only three get loans so how can the lower income group buy their own homes if they can’t even get loans?” he asked.
In a parliamentary reply to Lim on the issue, the Finance Ministry revealed that a total 50,224 loan applications worth a total RM10.3 billion were approved to buyers of affordable housing costing below RM400,000 for the first four months of this year.
However, a total 34,662 applicants for loans amounting to RM7.3 billion were rejected within the same period.
Last year, a total 170,886 loan applications for houses below RM400,000 amounting to RM34.5 billion were approved while 120,291 applications amounting to RM24.8 billion were rejected.
The ministry said that the applicants were rejected because they do not fulfil borrowing requirements that include their income, unsatisfactory credit record with high debts or financial commitments.
It added that the banks did not approve loans to those who fell short of requirements to avoid borrowers from falling into deeper debts that they could not pay.
Today, Jagdeep said the interest rates and loan application process should not be applied across the board for all borrowers as it would highly disadvantage the lower income group.
“You can’t give the same conditions and interest rates to a buyer of a RM1 million house as someone buying a RM40,000 house,” he said.
He added that all buyers of low cost and low medium cost housing were thoroughly vetted for eligibility so there is no question of them misusing any special loan schemes that could enable them to purchase their first homes.
The federal government formed Syarikat Jaminan Kredit Perumahan Bhd (SJKP) in 2008 to encourage people to buy their own homes.
The SJKP provides financial guarantee to loans given out to buyers of low and low medium cost houses costing below RM100,000 but as at March this year, only 3,684 applicants obtained the financial guarantees from SJKP.- See more at: http://www.themalaymailonline.com/malaysia/article/new-rate-hike-could-bury-hopes-of-would-be-homebuyers-says-dap#sthash.knuPu7Xl.dpuf
Bank Negara ups OPR for the first time since 2011
PETALING JAYA: Interest rates are set to rise with Bank Negara having raised the benchmark overnight policy rate (OPR) by 25 basis points (bps), or 0.25%, to 3.25% as part of measures to curb rising household debt.
The hike was within most economists’ expectations after the broad hints given in the last monetary policy statement in May, in which policymakers had expressed concerns over the continued build-up of financial imbalances....... - http://www.thestar.com.my/Business/Business-News/2014/07/11/Bank-Negara-ups-OPR-for-the-first-time-since-2011/
Maybank to revise deposit, lending rates on Wednesday
KUALA LUMPUR: Malayan Banking Bhd will revise its deposit and base lending rates effective July 16, in tandem with the 25 basis points increase in the Overnight Policy Rate (OPR).
It said on Friday its deposit rates will be revised upwards by up to 15bps.
Maybank's base lending rate (BLR) and base financing rate (BFR) would be increased by 25 basis points from 6.60% per annum to 6.85%.
Its last revision in BLR and BFR was on May 11, 2011 when they were revised from 6.30% to 6.60%. - http://www.thestar.com.my/Business/Business-News/2014/07/11/Maybank-to-revise-deposit-lending-rates-on-Wednesday/
‘New OPR will have little impact’
PETALING JAYA: An increase of 0.25% in the overnight policy rate (OPR) will not have a significant impact on borrowers for low-cost and affordable housing priced between RM45,000 and RM450,000, according to a senior executive of a real estate agency.
VPC Realtors (KL) Sdn Bhd director James Wong said there would only be an estimated marginal increase of RM5 to RM53 per month in loan repayment compared to the previous interest rate for a 30-year tenure with a 20:80 margin (see chart).
“As for high-end residential properties, most buyers are either cash buyers or they buy with a minimum loan margin. Hence, an increase of 0.25% per annum will be insignificant,” he added.
Bank Negara has raised the benchmark overnight policy rate by 0.25% to 3.25%, the first rate hike since June 2011.
Mortgage rates are based on the base lending rate (BLR) which in turn is correlated to the central bank’s OPR.
Wong felt that speculators would be hit the most.
“If they are unable to service the loan, they will be forced to sell. But it will not be as easy as before due to the real property gains tax,” he said.
- http://www.starproperty.my/index.php/articles/investment/new-opr-will-have-little-impact/
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