MOF Up to 80% only??

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Will Bank Negara Reduce Home Loan Margin to 80%?

Business Times Online, 30 August, 2010

The property sector is likely to be downgraded if Bank Negara Malaysia imposes a lower mortgage Loan-to-Value (LVR) ratio, says Kenanga Research.




Bank Negara is reported to have written to financial institutions to secure feedback on the possibility of capping the LVR for mortgages at 80 per cent to avert the risk of a potential property bubble.

Currently, banks can usually lend up to 90 per cent of the house value, or up to 100 per cent in selected cases, which has been handy for developers promoting their newly launched under interest absorption schemes like 10/90 home loan schemes.

Kenanga Research in a research note today said it would not be surprised if Bank Negara implements the 80 per cent cap on the mortgage LVR, or at least for properties more than RM500,000, as the government is clamping down on investment related property acquisitions.

“If implemented, we are likely to downgrade our sector call, as we expect property transactions to fall since deposit requirements will double, or essentially doubling the investment risk, limiting the number of homes that an individual can buy.

“We expect buyers to become more discerning when it comes to property choices, meaning stronger market leaders with branding and quality will be winners, when it comes to grabbing the market share of a smaller pie,” Kenanga Research explained.