The average lending rate fell to 4.56% in December 2013, significantly below historic rates. The Overnight Policy Rate (OPR) is at 3%. This is despite the base lending rate (BLR) being raised in December 2011 to 6.53%, where it remains.
Malaysia lending rates
These low interest rates explain why, despite many curbs, mortgage lending is still surging in Malaysia. In July 2013, Bank Negara Malaysia (BNM) introduced new policies to reinforce responsible lending practices.
- The new maximum home loan period was reduced to 35 years, from the previous period of 45 years.
- The maximum personal loan period was shortened to 10 years from 35 years.
- Pre-approved financing products are no longer possible.
Aside from these three new policies, the BNM introduced stricter lending guidelines on January 1, 2012, requiring mortgage eligibility assessments to be based on net income, considering:
- Statutory deductions for tax;
- Employees Provident Fund (EPF) contributions, and;
- All other debt obligations.
Yet despite all this, outstanding housing loans in Malaysia increased by 10.7% in 2013 to MYR 271.2 billion (US$ 82.7 billion), about 27.3% of GDP.
To make home-buying possible for people on low and medium incomes and young people, in July 2011 the Malaysia People’s Housing (PR1MA) Bill 2011 was launched. Developers are as a result switching from high-end developments to mid-range ones to lure first time buyers with easier financing and reduced stamp duty for houses below MYR 400,000. Borrowers with monthly income up to MYR 7,000 per month qualify for the scheme.
