If you were to read the press lately, the housing and local housing ministry is working with Bank Negara Malaysia (BNM) to ease lending guidelines. This is to reduce the unsold residential units in the country.
This will be good news to aspiring house buyers especially to those buying their first house. Many will be waiting for this to happen.
I will think that BNM have to be cautious in relaxing the rules. We do not want to fall into subprime crisis if it’s too relax. It’s bad for the country.
If we look at the figures, the bank are still lending. There are still “hungry” banks in the market.
Banks still approves loans at a rate of 72.7%. If you asked me, that pretty high. Banks are profit organization not charity organisation. I think everyone knows that. Profit for them will be their bottom line as they are accountable to the shareholders.
Let look at an example. If your friend want to lend RM20,000 from you and you know that he earns RM 5,000 with debts repayment totalling to RM 7,000 a month. Would you lend money to him? If you will not, do you think that the bank will lend. They are worried the borrower will not be able to pay his/her monthly repayment. The risk definitely is very high. Banks do take risk in lending, but they are prudent only will only take calculated risk.
BNM can relax the tightening policy but every bank has their own lending policy also. Some are more relax and some are very rigid. Bottom line, they cannot afford a high non-performing loan (NPL).
Borrowers need to do a proper financial planning. After taking into account your income deduct all your expenses. What is left 20% as savings, the rest can use to pay your instalment. Many people buy what they cannot afford. They do impulse buying. Please think back can you afford to pay the monthly instalments.
I have a case of a couple buying their first house many years back. I gave the couple a piece of paper to list down their income and all their expenses. After they have done with the list I put in the house instalment. To their horror, it shows negative. They are not even ready to buy a house. Looking at their list and after discussing with them I found out that they spend a lot of money in eating in restaurants and bought a lot of unnecessary things. I told them, you have a child now, you have to start proper planning for your future. After discussing among themselves they can make do without so many things. Why you need to eat in lavish restaurant every time. You can cook simple meals at home. Even now, I eat in hawker stalls. What is so great in letting people know you are wealth in which you are not. I still ride my old trusty motorbike of 20 years. People use electric starters to start their engine, I still use leg power.
What other people look at you is immaterial. What is important is you have a proper planning for your future. If money earned is not enough work part time on Saturday and Sundays to supplement your income. I give talk on weekend and I am not complaining. You need to like what you do.
I hope this article can assist you to make an inform judgement.