Bank Negara Malaysia (BNM) has highlighted that commercial banks have "considerable flexibility” to decide on approving mortgages.

There is no cap on civil servants' debt service ratio (DSR), as loan affordability are assessed based on borrowers' financial circumstances, the central bank stressed in a statement issued on Tuesday, 19 June.

"The DSR adopted by financial institutions takes into consideration the financial circumstances of the borrower based on factors that include a borrower's income, existing debt repayment obligations a borrower is already committed to, and reasonable buffers to meet essential expenditures and emergencies" the statement read.

"BNM has not prescribed the DSR level for civil servants" it stressed.

The central bank disagrees with the view that commercial banks are too strict with housing loans leading to complications of house ownership.

The statement was issued in response to The Edge Weekly's recent article entitled "Lending rules for housing may be relaxed but analysts are wary”.

The central bank said all banks have "considerable flexibility” to determine income sources, and the appropriate debt to income level or debt service ratio that borrowers can reasonably sustain.

As at March 2018, 72% of housing loan applications were approved by banks, and of which 71% were for the purchase of affordable homes below RM500,000, said BNM.

Commenting on the need for a separate classification for buyers of affordable homes - due to combined incomes between a pair of spouse or an additional income stream - BNM said banks are well aware and have put into practice such consideration.

"It is a current practice among banks to take into consideration other sources of income, including variable income, of the borrowers in assessing loan affordability provided that these are supported by documentary evidence such as bank statement, commission statement or rental agreement" it said.

"Banks also commonly allow for a spouse or family member to be joint borrower(s) of the housing loan to improve affordability" said BNM, citing Malayan Banking Bhd, CIMB Bank, Public Bank, RHB Bank, AmBank, Hong Leong Bank, Affin Bank and Bank Islam as examples.