KUALA LUMPUR: Amid concerns over Malaysia’s escalating household debt and rising property prices, banks have been setting stricter internal valuation guidelines for mortgage loans.
Of late, banks have been said to adopt lower valuations on homes for which mortgages are taken out compared with their transacted prices.
This is not being implemented across the board by banks, but on a case-by-case basis, depending on the property as well as the borrower.
Consumer bankers acknowledge that there has been increased scrutiny of mortgages and sometimes banks end up adopting their own internal valuation on a property rather than the market price, but they add that this is done on a case-by-case basis.
“We are doing a lot more of that today, compared with two years ago. It is not widespread but it is something that we look at more closely nowadays … case-by-case,” said a senior banker with one of the top five local banks.
A senior analyst with a local research outfit noted that the reason for a rise in the practice is because some bankers feel the value of the property could differ from the last transacted price for certain properties.
“For example, they feel that a particular property could be worth RM400,000, but a recent transaction of a similar property is RM500,000. This is not a discount, but bankers are sceptical of the last transacted price. Over the last few months, physical prices have gone up so much and as such, bankers are more stringent on mortgage lending in some cases, so you see this trend happening,” he explained.
“Bankers could use their own valuations. That is a risk for the secondary housing market … buyers won’t face this if the property is bought from the developer,” he added.
HwangDBS Vickers Research banking analyst Lim Sue Lin points out that Singapore banks have been practising this for some time now. “The [Singapore] banks have been basing mortgages on their internal valuations and not on market price,” she explained.
“It is good that bankers are keeping a close eye on mortgage lending and there are results. As you can see, the non-performing ratios have improved … not just for residential properties, but overall non-performing loans (NPL) in general,” she added.
Earlier this month, Bank Negara Malaysia (BNM) announced that a maximum loan-to-value (LTV) ratio of 70% would be applicable to a third-house financing facility taken out by a borrower. This was aimed at supporting a stable and sustainable property market while promoting continued affordability of homes for the general public.
This came about amid a rapid build-up of household debt over the past decade, since the end of the 1997/98 Asian financial crisis. This was partly a result of banks shifting their focus to home mortgages following large corporate failures during the crisis, as well as the lacklustre post-crisis investment climate.
Malaysia’s household debt rose 11.1% a year from 2004 to 2009, pushing the household debt-to-GDP ratio from 66.7% to 76% — the second highest in Asia, after Japan’s 130%.
Despite the rise in household debt, the asset quality of local banks does not appear to have deteriorated.
According to BNM statistics, NPLs for the purchase of residential properties have been declining for the past four months up to August, but picked up slightly in September.
In August, NPLs for the purchase of residential properties stood at RM7.75 billion, which was lower than the RM7.8 billion in July and RM7.88 billion in June. It was RM8.16 billion in May and RM8.22 billion the month before.
However, NPLs for the purchase of residential properties in September inched up to RM7.8 billion from RM7.75 billion a month before, accounting for 26.8% of the banking system’s total NPLs of RM29.07 billion.
Incidentally, this ratio is similar to the 27% share of total bank loans that went towards residential properties.
Even so, September’s NPLs for residential properties are down 24% year-on-year, from RM10.3 billion in September 2009.
The asset quality of the overall banking sector has also improved.
Overall, the net NPL ratio improved to 2% in September compared with 2.1% in August and July, respectively, and 2.2% in June.
(Source: The Edge Online)
No comments:
Post a Comment