Banks Exercise Considerable Flexibility in Granting Housing Loans, With Three in Four Loans Approved
In slamming reports that banks are too strict with housing loans, Bank Negara Malaysia clarified that financial institutions exercise "considerable flexibilityâ€ in approving mortgages.
It explained that the debt service ratio (DSR) adopted by financial institutions take into consideration the borrower's financial circumstances based on several 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 emergenciesâ€.
However, the central bank underscored that it had not prescribed a DSR level for civil servants.
In fact, 72 percent (or almost three in four) of housing loan applications were approved by banks as at March 2018.
"Of this, 71 percent were applications for the purchase of affordable homes priced below RM500,000" revealed BNM on its Housing Watch website.
Banks took into consideration other sources of income by the borrowers, including variable income, "in assessing loan affordability provided that these are supported by documentary evidence such as bank statement, commission statement or rental agreementâ€.
To improve affordability, banks also commonly allow a spouse or family member to be joint borrower(s).
"Major banks that observe such practices include Maybank, CIMB, Public Bank, RHB, AmBank, Hong Leong Bank, Affin Bank and Bank Islam" it added.