KUALA LUMPUR, April 10 — RAM Rating Services Bhd expects the credit quality of the banks’ housing loans to stay relatively stable this year despite the spiralling cost of living.
In a statement today, its Co-Head of Financial Institution Ratings, Wong Yin Ching, said the gross impaired loan ratio for the industry’s residential property loans remained at a low 1.2% as at end-February 2017.
“Households’ debt-servicing ability is largely supported by Malaysia’s healthy economic growth and low interest as well as unemployment rates,” Wong said.
Wong said even for properties that were priced below RM250,000 at origination, which typically exhibited poorer credit quality, the weakening has not been significant.
The rating agency said the residential property sector was envisaged to remain sluggish in 2017, checked by depressed consumer sentiment and selective lending by banks.
As such, transaction volumes were likely to stay muted, it said.
Nonetheless, it said, the availability of affordable housing has been gathering momentum.
RAM said depending on the speed of the roll-out of homes under the 1Malaysia People’s Housing Programme (PR1MA), the new, more accessible end-financing scheme for PR1MA units could contribute about one to two percentage points to the banking system’s overall loan growth over the next two years.
It said the new affordable housing end-financing scheme featured interest-only payments for the first five years of the loan.
Wong said the agency would closely monitoring this new segment of borrowers.
“Some of them may face repayment issues when the interest-only period ends and the full repayment of principal and interest kicks in, especially if macroeconomic conditions become unfavourable,” said Wong.
On the converse, Wong said, banks’ credit risk would be partly mitigated by their ability to call on the government guarantee of up to RM100,000.