The latest property market reports show that the new housing loan guideline has successfully cooled down the property market, with HwangDBS Vickers saying that mortgage approvals and applications in February this year were 27 and 18 per cent lower respectively than last year’s peak partly due to the stricter lending guidelines effective from January onwards. It has also mentioned
that the loan approval rate has fallen to 45 per cent from 55 per cent in August last year, while the margin of financing has been reduced to 70-80 per cent from 90-95 per cent in the heyday of the property boom.

Cause For Concern?

According to Dr Yeah Kim Leng, Chief Economist of Ratings Agency Malaysia Holdings Bhd (RAM), property prices have risen to a level that has created some concern. In fact the International Monetary Fund (IMF) in its Article 4 consultation report has mentioned that this is the main risk or vulnerability facing the Malaysian economy: overvalued house prices.

“It is not a bubble yet largely because for certain segments (of the market), their income level is sufficient to absorb those kinds of (high priced) houses. But there comes a point where you will find declining demand largely because of rising vacancies or declining rental yields that will help to cap property prices,” Yeah added.

Can we still buy property? Certainly! This is provided that you are prepared for higher down payment and if you understand the risk of increasing BLR throughout the loan tenure. Credit Underwriters now have tighter assessments on individual CTOS and CCRIS as well as collateral which refers to the property to be financed. This could avoid “unfair” deals higher than the market price as the underwriter ensures that the property is free from floods and landslides, in close proximity to power stations, oxidation ponds or faces any T-junctions. Properties affected by these factors would have poor marketability and may not be accepted by the financier.

Manage Your Loans Before They Manage You

As a smart buyer, loan management is essential to safeguard your property against foreclosure risk or never ending loan repayments. Firstly, you have to understand the terms and conditions of the Loan Offer Letter and the risk of BLR fluctuation. An increase of 1.00% on BLR may incur a hike in paying interest by 22.73%.

EXAMPLE:

Loan Amount or Outstanding Balance : RM200, 000.00
Loan Tenure : 30 years
Loan Margin : BLR – 2.2%
Payable Interest @ BLR=6.60% : RM 723.29
Payable Interest @ BLR=7.60% : RM 887.67

Payable Interest Increased by 22.73%

For the middle- to lower-income group who pay higher household debt versus disposable income monthly, they are under stress of high inflation rates. In essence, they are vulnerable to higher BLR rate.

What is the expected BLR throughout 30 years loan tenure? What should you do when BLR fluctuates to protect your best interests? BLR increased to 12.27% by 1998 and 5.55% at 2009, the average BLR for a 30 year loan is between 8% - 9%. It will prolong loan repayment tenure and paying extra cost for owning a property. When BLR fluctuates, borrowers should adjust monthly repayment amount accordingly to avoid paying extra interest and tenure.

How AceScube Works

AceScube exists as a response to borrowers’ real financial needs. The monthly service fee reflects our promise of quality service as we reward customers with Borrower Help Borrower (BHB) Campaign. We provide the best solutions in settling housing loans at minimum interest and within the shortest timeframe, helping to turn liability(s) into real asset(s).

Creating awareness on loan management through Customer Appreciation Program by AceScube may promote financial wisdom via proper credit utilization. AceScube assists borrowers to monitor their loan with Customised Interest Saving Scheme to slash tenure and interest, and monitor BLR fluctuation risk from time to time. With BHB Program, borrower is giving monthly cash incentive (20%) by recommending friends and family to take up the Customer Appreciation Program. You can plan with the monthly cash incentive gain from Customer Appreciation Program to settle housing loan, car loan, personal loan etc. Besides hedging against inflation, borrowers (especially the middle- to lower-income group) has the opportunity to enjoy debt free life before reaching retire age.

This article is contributed by AceScube, which provides training in loan calculation, banking and finance knowledge and other business and communications know-how for entrepreneurs. For more information on starting a business with them, you may drop them an email at info@acescube.com.my to find out more about BLR Management.